Topic: Withdraw the cash directly from the company for personal use

Sometimes, the owner of the company may withdraw the cash directly from the company for personal use .

Likewise, the company needs to make the owner withdrawal journal entry in order to account for this event.

Can you help me on how to record this event in the journal?

Do I need to add a new account and if yes under which category?

Re: Withdraw the cash directly from the company for personal use

Of course the best thing is to talk an Accountant that knows your Chart of Accounts. He/She can advise you best.
Having said that the first thing to find out is in which account the owner contributed his money in your company's COA.  Then with Bank Payment you can Credit the Bank (1061 for example) and Debit the Contributing account i.e Common Shares (3350) or alternatively create a new account with the name of the owner i,e John Common Shares (3351) and Debit that account.

Re: Withdraw the cash directly from the company for personal use

I am not sure. But it may be the way to make the transaction , the entry for the transaction will be:

Cash A/c Dr.

To bank A/c

(Withdrew cash from bank)

If any accountant here . Help him to make this entry.

Re: Withdraw the cash directly from the company for personal use

Thank you all for your contributions.

In one of the websites I found that As long as the company has a single owner and the withdrawn amount will reduce the capital amount then I can do the following :

Debit - Cash A/c
Credit - Capital A/c

But will this transaction be reflected on the bank balance by deducting the withdrawn amount?

In all cases, the withdrawal of the amount should not appear in the profit and loss account as a loss.

Re: Withdraw the cash directly from the company for personal use

Debit Cash A/c

Credit Director Current A/c

6 (edited by said.omn 09/29/2021 06:42:47 am)

Re: Withdraw the cash directly from the company for personal use

Thank you apmuthu

In fact, I don't have an account called Director Current A/C.

Shall I add this account? and if yes , under which group of the following it should be:

Current Assets   
Fixed Assets           
Inventory Assets       
Capital Assets       
Current Liabilities       
Long Term Liabilities       
Share Capital       
Retained Earnings       
Sales Revenue       
Other Revenue       
Payroll Expenses       
General & Administrative expenses       
Cost of Goods Sold

Please note that the withdrawal money doesn't consider as a loan as won't come back to the company, in this scenario is the transaction you suggested will be the right one?

Re: Withdraw the cash directly from the company for personal use

If the monies do not comeback to the company then it will be wrong to allow it as an advance.
The monies withdrawn then are of an expenditure nature as it will not come back. In such a case, it must be charged to an expense account that is legitimately for the company to incur although the director may be the one that is being reimbursed or authorised for the transaction.

Re: Withdraw the cash directly from the company for personal use

So let's assume the following:
1. The company is owned by only one person.
2 . This amount is part of the company's profits to be paid to its owners, as it is he who has financed the company's capital from the beginning.

  How is this amount documented in this case?

Re: Withdraw the cash directly from the company for personal use

Is the owner taking a paycheck or only doing cash withdraws from the business bank account?

10 (edited by said.omn 10/11/2021 05:51:25 am)

Re: Withdraw the cash directly from the company for personal use

It's cash withdrawn from the business bank account?