Should an owner’s compensation be recorded as an expense or in the Drawing account?
If the enterprise is a sole proprietorship, the owner’s compensation should be debited to the Drawing account.
If the enterprise is a corporation, the owner’s gross compensation should be debited to a salary expense account.
You can learn more about accounting and bookkeeping at AccountingCoach.com.
Comments
One Response to “Should an owner’s compensation be recorded as an expense or in the Drawing account?”
Leave a Reply
 | Free updates with your feed reader (or) receive our monthly Q&A newsletter by filling out the form below: |
Accounting Cheat Sheet
Receive our popular 15-page Cheat Sheet at no cost when
you join our free newsletter:
|
We keep your email address 100% safe and secure.
Most Recent Questions
- What is the meaning of sundry and sundry debtors?
- If an accrual adjusting entry increases an expense and a liability, how does the balance sheet remain in balance?
- What is the difference between liquidity and liquidation?
- What is the meaning of pro rata?
- What is the difference between financial accounting and management accounting?
- What is the difference between accounts payable and accounts receivable?
- In a bank reconciliation, what happens to the outstanding checks of the previous month?
Questions by Category
- Debits and Credits
- Depreciation
- Financial Accounting
- Financial Ratios
- Improving Profits
- Income Statement
- Inventory and Cost of Goods Sold
- Lower of Cost or Market
- Manufacturing Overhead
- Nonmanufacturing Overhead
- Payroll Accounting
- Present Value of a Single Amount
- Present Value of an Ordinary Annuity
- Standard Costing
- Stockholders' Equity
Why AccountingCoach.com?
AccountingCoach.com is designed to help people without an accounting background easily understand accounting concepts at no cost.
By investing thousands of hours, we have created clear and concise accounting information for both business people and students of all ages.
Read 1,200+ Visitor Testimonials
In your answer to the question on owner’s compensation, it is stated that if the enterprise is a
sole propritorship, the owners compensation is to be debited to owners drawing Account.I feel that
the correct entry for this transaction is to credit
owners drawing A/C and transfer the debit balance
of Drawing A/C to owners equity.
I hope I am correct.If not please clarify.