Owners Distributions

What Is An Owners Draw or Distributions?

A lot of entrepreneurs ask me "Where has my net income from my business gone?" One of the first places I go and look and more often than not the answer is the Equity Section on the Balance Sheet. The owner's draw or owner distribution account is found on the balance sheet, meaning it is not directly tied to the income statement. An entrepreneur might have 100K in net income, but if they have taken 95K out in an owner's draw or distribution, they won't have much cash left.

In addition, most entrepreneurs don't realize that the owners draw or distribution account is often where expenses that are charged to the business that are not business-related end up. So while an entrepreneur has been purchasing their personal Netflix subscription through their business, a lot of times they are not aware that the purchase does not end up on their income statement. The really important thing to remember is the owner's draw account is an exact inverse of any and all expense accounts.

- Ryan

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