How do drawings affect the financial statements?

Drawings or withdrawals by a sole proprietor will affect the company’s balance sheet through the reduction of the asset withdrawn and a reduction in owner’s equity.

A draw of cash will also be reported in the financing activities section of the statement of cash flows. (If an asset other than cash is withdrawn, it is reported as supplemental information on the statement of cash flows.)

The income statement is not affected by the owner’s draw.

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