Sole proprietorship
The recordings on this page explains how to prepare
journal entries for drawings and capital, including relevant transfers at the end of each accounting year
drawings and capital account, including transfers and bal b/d
Embedded Files
Journal Entries
Journal Entries
Record drawings on the actual day that it happened:
Dr Drawings (+)
Cr <Account>
Record capital contribution on the actual day that it happened:
Dr <Account>
Cr Capital (+)
At the end of every accounting year and IN THIS ORDER:
Step 1: Transfer profit/ loss for the year to capital
If business made a profit,
Dr Income Summary
Cr Capital (+)
If business made a loss
Dr Capital (-)
Cr Income Summary
Step 2: Transfer total drawings to capital
Dr Capital (-)
Cr Drawings (-)
Drawings and Capital Ledger Accounts
Drawings and Capital Ledger Accounts
Drawings Ledger Account
At the end of every accounting year, transfer balance in drawings account to capital account.
Capital Ledger Account
Begin with the Bal b/d on the 1st day of the accounting year
At the end of every accounting year and IN THIS ORDER:
transfer profit (or loss) for the year to capital account
transfer total drawings for the year to capital account
Bal b/d to the 1st day of the NEXT accounting year.
This picture shows the general format of the drawings and capital ledger accounts.
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