I am a partner in a LLC. I use the company gas card for my gas which is not considered an expense. Should I pay the portion of the gas card with the "draw" account? Can you explain how the "draw" account works on the balance sheet?

ANSWER

The BIDaWIZ Team's Answer:

Please note that the transaction would be a credit to the cash account and a debit to the drawing account (i.e. a contra equity account). It is not treated as an expense, but rather a reduction of owners' equity in the business. The drawing account is intended to track distributions to owners in a single year, after which it is closed out (with a credit) and the balance is transferred to the owners' equity account (with a debit). The drawing account is then used again in the next year to track distributions in the following year. This means that the drawing account is a temporary account, rather than a permanent account.