Which statement about the drawing account is correct?

Which statement about the drawing account is correct?

• A. It is part of revenues.
• B. It represents withdrawals by the owner.
• C. It increases liabilities.
• D. It records gains from investments.

Answer: (B)

Drawings represent amounts taken out of the business by the owner for personal use, so this account is a contra-equity account that reduces the owner's equity. It is not part of revenues, not a liability, and it does not record gains from investments. At period-end, drawings are closed to the owner's capital to reflect the impact of withdrawals on the owner's investment. Therefore, the correct idea is that the drawing account represents withdrawals by the owner.

Drawings represent amounts taken out of the business by the owner for personal use, so this account is a contra-equity account that reduces the owner's equity. It is not part of revenues, not a liability, and it does not record gains from investments. At period-end, drawings are closed to the owner's capital to reflect the impact of withdrawals on the owner's investment. Therefore, the correct idea is that the drawing account represents withdrawals by the owner.