Inventory drawing?

how to handle drawings of inventory stock ??

You need to provide more information so someone can answer your question. Do you mean using inventory stock for internal company purposes? Or do you mean owners taking inventory stock as a form of draw in the classical accounting sense of withdrawing capital? Or do you mean something else?

1 Like

Sorry, What i mean to say is. For example I got stock of 100 book then I withdraw 5 books from my stock in the sense owner taking some books from inventory stock for personal use .
Now how do I deal with that journal entry? or just “Write off from inventory items??”
+ I don’t see the word “Drawing” in the “Suspense” When I try to put a journal entry?

I’m not a accountant help out buddy? :smile:

I am assuming you are the sole owner of the company.

Conceptually, in double-entry accounting, you are reducing your owner’s equity. That is a debit. The offsetting credit is the reduction of inventory. In effect, you are withdrawing some of your investment in the company, but in the form of books rather than cash.

A write-off is not really appropriate. That is what you do when you take something from inventory for internal company use. An example of when that would be appropriate would be a cleaning supplies company taking floor polish from inventory to clean its own floors.

As to how you implement the transaction, that depends on your exact chart of accounts, particularly, how you are accounting for owner’s equity or capital. There is no automatic drawing account. You would have to create one first. But drawing accounts are temporary accounts and are not really needed in Manager, since they are a holdover from manual accounting books and were closed every year. They are still used in more formal settings, such as partnerships. But if you are the sole proprietor, all equity belongs to you, so you can take draws directly.

The Suspense account is where Manager allocates transactions it cannot properly identify. Normally, your Suspense account should be zero. When it is not, that generally means you have entered an unbalanced transaction. If you are new to double-entry accounting, learn about it at http://www.accountingcoach.com. Manager is a tool, not a substitute for basic accounting knowledge.

Actually inventory write-off is perfectly fine to handle this. The only issue is that I don’t think inventory write-off is currently possible into capital account.

Do you use Capital accounts tab?

1 Like

If you can handle this directly from inventory write-off, that is financially equivalent to transferring from inventory to drawing account and then out of equity. So what @lubos describes is a shortcut, reducing two transactions to one.

Oh Okay, Thanks & what I did is make a account of drawing through ->settings->charts of accounts in equity then write off inventory item allocating drawing account.

@lubos, Pardon me, but this method is going to decrease the Gross Profit.
Would the normal accounting principle not be to actually pay for stock taken?

Using inventory write-off won’t decrease your profit if you use equity account for write-off like @CitizensTradingEst did.

1 Like

I can see that. It does not appear anywhere on a report. The normal reports, P/L, Balance Sheet, Trial Balance or Ledger.

Is that OK,

1 Like

As a sole trader, can I make a sale to myself with 0 (zero) sale price? This will reduce profit but that is what really happens as I paid for the stuff and don’t make a sale out of it.

No, the cost of the item should not reduce your profit as taking goods for private use is not a business expense / deduction.

Goods taken for private use should be transferred from the Inventory on-hand to the BS Equity section (Drawings account or similar) via either a Journal or Inventory Write-off transaction.

.

How can I allocate the inventory write-off to a drawings account? I have a drawing sub-account under capital account. But when I try to do inventory write-off via the Inventory Write-offs tab, the Allocation dropdown doesn’t show any BS accounts, instead it only shows the accounts under Profit and Loss Statement.

Thanks

In that case use the Journal Entry option - (you will need to know the Avg Cost first)
Credit Inventory on Hand + Inventory Item + unit
Debit Capital Account + Drawings

@Brucanna Thank you very much!

Hi, I just realized that using the Journal Entry option I can’t choose the location of the item. So while the item’s qty on hand is correct, there’s a -1 on Unspecified Location. Is there any way to have the inventory drawing allocated to a location?

PS. In the Inventory Write-offs tab, there are still only Profit and Loss Statement accounts listed on Allocation, so I can’t choose Capital Account -> Drawings.

Thanks

If you are using Inventory Locations, then you will need to do a separate Inventory Transfer, this enables quantities to be transferred between locations. Inventory Transfer is another tab.

To record inventory drawing, do not use inventory write off. Drawings affect your equity and purchases since the owner is taking goods for personal use.

Create a drawing account as a debit in your chart of accounts in the Equity group.

To record an inventory item taken for personal use, you will use a journal entry.

Select new journal entry and do the following:

From account, select Inventory on hand put the Inventory value under credit.
Select Drawing from account in the next line and debit with same inventory value.

This completes the double entry. Your inventory will decrease by the item Inventory value and your capital will be reduced by the same amount.

You’re welcome.