Drawings of stock implies stock or goods taken away by the proprietor or partner for personal purposes.

Recording - Journal Entry

Drawings of stock is also an accounting transaction and has to be brought into the books of accounts through a journal entry.

• Debit - Drawings a/c

  Drawings a/c represents the owner. It provides the information relating to the amounts withdrawn by the owner or proprietor for personal use. The same account is used to record the value of goods withdrawn for personal purposes also.

  Drawings a/c ↓ Personal a/c ↓ receiving benefit ↓ Debit [Debit the benefit receiver]

• Credit

  The value of goods withdrawn by the owners represents the value of stock that been used for purposes other than trading.

  To ascertain the cost of goods sold, the value of stock used for purposes other than trading has to be deducted from the total value of goods by crediting one of the following ledger accounts.

  • Trading a/c
  • Cost of Goods Sold a/c
  • Purchases a/c
  • Stock Drawings a/c

  Which account is credited is dependent on what comprises the value of abnormal loss stock and the account in which the related value exists at the time of recording the entry.

It would be appropriate to adjust the value of goods used for purposes other than trading from the account that holds the total value of goods. The total value of goods can be assumed to be existing as a debit balance in the Trading a/c to which all direct expenses are transferred at the end of the accounting period or in the Cost of Goods Sold a/c if it is being maintained and all the direct expenses are being transferred to it.

The value of goods used for purposes other than trading are to be deducted from the total value of goods (along with the value of good unsold) in arriving at the cost of goods sold. Since the total value exists as a debit balance, deducting from the total value requires the account holding the total value to be credited.

Thus the value of stock drawings has to be credited to the Trading a/c or the Cost of Goods sold a/c in which the total value of goods/stock is existing as a debit balance.

Credited to Trading a/c

Journal

Particulars		Amount (Dr)	Amount (Cr)
Drawings a/c To Trading a/c	Dr	28,000	28,000
[For the value of goods withdrawn by the proprietor for personal purposes]

Drawings a/c

DrCr
Date	Particulars	Amount	Date	Particulars	Amount
– 31/12/_5	To Bank a/c To Trading a/c	– 28,000	31/12/_5	By Capital a/c	–
		–			–

Trading a/c

DrCr
Particulars	Amount	Particulars	Amount
To Opening Stock To Purchases To Direct Expenses To Gross Profit	– – – –	By Sales By Drawings By Closing Stock	– 28,000 –
	–		–

Credited to Cost of Goods Sold a/c

Journal

Particulars		Amount (Dr)	Amount (Cr)
Drawings a/c To Cost of Goods Sold a/c	Dr	28,000	28,000
[For the value of goods withdrawn by the proprietor for personal purposes]

Drawings a/c

DrCr
Date	Particulars	Amount	Date	Particulars	Amount
– 31/12/_5	To Bank a/c To Cost of Goods Sold a/c	– 28,000	31/12/_5	By Capital a/c	–
		–			–

Cost of Goods Sold a/c

DrCr
Particulars	Amount	Particulars	Amount
To Opening Stock To Purchases To Direct Expenses	– – –	By Drawings By Closing Stock By Trading a/c	28,000 – –
	–		–

Adjusting the goods used for purposes other than trading from the Purchases a/c would be rational under this circumstance.

The stock used is physically relatable to the stock that has been purchased during the current period and there are no direct expenses in relation to the stock purchased during the current period or the value of stock used does not include the direct expenses incurred during the current period.

Journal

Particulars		Amount (Dr)	Amount (Cr)
Drawings a/c To Purchases a/c	Dr	28,000	28,000
[For the value of goods withdrawn by the proprietor for personal purposes]

Drawings a/c

DrCr
Date	Particulars	Amount	Date	Particulars	Amount
– –	To Bank a/c To Purchases a/c	– 28,000	31/12/_5	By Capital a/c	–
		–			–

Purchases a/c

DrCr
Particulars	Amount	Particulars	Amount
– –	– – –	– By Drawings –	– 28,000 –
	–		–

During the accounting period

If the journal entry for recording the drawings of stock is being recorded any time during the accounting period, then Purchases a/c has to be credited since the Trading a/c and Cost of Goods sold a/c would not be available in the books of accounts as they are accounts that are created only towards the end of the accounting period.

If the organisation intends to maintain distinct information relating to stock drawings and not club the stock drawings with other drawings like cash, then a separate ledger account by name Stock Drawings is maintained and all drawings of stock are credited to that account.

Journal

Particulars		Amount (Dr)	Amount (Cr)
Drawings a/c To Stock Drawings a/c	Dr	28,000	28,000
[For the value of goods withdrawn by the proprietor for personal purposes]

The Stock Drawings a/c is a nominal account which provides the information relating to the total value of stock withdrawn during the current accounting period. It's balance provides the answer to the question, "What is the total value of stock withdrawn till now"? At the end of the accounting period, it is closed by transfer to the Trading a/c or the Cost of Goods sold a/c or the Purchases a/c depending on what the value in the account represents and which account holds the total value of that kind.

Drawings a/c

DrCr
Date	Particulars	Amount	Date	Particulars	Amount
– –	To Bank To Stock Drawings	– 28,000	31/12/_5	By Capital	–
		–			–

Stock Drawings a/c

DrCr
Particulars	Amount	Particulars	Amount
To Trading a/c	–	By Drawings By Drawings By Drawings	– 28,000 –
	–		–

Adjustment is bringing in the effect of the transactions through mathematical operations of addition and subtraction. The adjustments to be made can be found out by ascertained the net effect of the journal entries to be recorded.

Adjustments are generally required for transactions which are not yet recorded at the time of making up the final accounts i.e. towards the end of the accounting period. Thus, for adjustments it would be appropriate to credit stock drawings to either the Trading a/c or Cost of Goods Sold a/c or the Purchases a/c.

Conventionally it is credited to the purchases account.

Working notes for adjustments

Entries	Net Entry	Adjustment	Side	Where
Dr. Drawings a/c Cr. Purchases a/c Dr. Capital a/c Cr. Drawings a/c	Dr. Capital a/c Cr. Purchases a/c	1. (−) from Capital 2. (−) from Purchases	Liabilities Debit	B/S Trdg

Read as

1. Deduct from Capital by adding/showing to/as drawings on the liabilities side of the balance sheet.
2. Deduct from Purchases as stock drawings on the debit side of trading account.

Trading a/c

DrCr
Particulars	Amount	Amount	Particulars	Amount	Amount
To Purchases − Stock Drawings	8,48,000 28,000	8,20,000

Balance Sheet of M/s ______ as on 30^th June 20_6

Liabilities	Amount	Amount	Assets	Amount	Amount
Capital + Net Profit − Drawings − Stock Drawings	– – – 28,000	–

The stock that is used by the proprietor or the owner for personal purposes represents the stock that is used within the organisation. This is because the organisation and owners are treated one and the same for the purpose of identifying transactions that generate income. As such the drawings of stock have to be valued at cost based on the principle of mutuality which states that one cannot make a profit out of a transaction with one self.

Principle of Mutuality