November 23, 2007
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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.
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One Response to “Should an owner’s compensation be recorded as an expense or in the Drawing account?”
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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.