Owner Draw
Definition
An owner draw (or distribution) is money the owner takes out of the business for personal use. It reduces equity and is not an expense.
Example
The owner takes $1,000 from the business checking account for personal use. Cash decreases $1,000 and Owner Draw (an equity account) increases $1,000. No expense is recorded.
Why It Matters
Recording an owner draw as an expense understates profit. It is not a business cost — it is the owner taking money out.