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December 19, 2021
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Difference between Personal Expenses and Owner's Draw

  • December 19, 2021
  • 1 reply
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I have a sole proprietorship. When I make personal purchases using my business bank accounts or credit card, I categorize them using the "Personal Expenses" category (I did not create this category, it came with QuickBooks by default). When I transfer money from my business accounts into a personal account, I categorize it as "Owner's Draw" (also came with QuickBooks by default). This approach seems to work fine for my purposes (neither Owner's Draw nor Personal Expenses appear in the profit and loss report, which is good), but I have seen some posts in this forum suggesting to mark all personal expenses and withdrawals as "Owner's Draw." Is there anything wrong with what I've been doing?

Best answer by Rustler

No matter the reason you take money from the company for personal expenses or transferring to your bank account, it is owners equity drawing.  In accounting there is no such thing as personal expenses since business and personal accounting has to be separated.  Why intuit created that personal expense account is anyone's guess, but they often mess things up

1 reply

Rustler
RustlerAnswer
December 20, 2021

No matter the reason you take money from the company for personal expenses or transferring to your bank account, it is owners equity drawing.  In accounting there is no such thing as personal expenses since business and personal accounting has to be separated.  Why intuit created that personal expense account is anyone's guess, but they often mess things up