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Different between drawing against and against …

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Different between drawing against and against capital

Posted by Devdutt Yadav 5 years, 7 months ago

CBSE > Class 12 > Accountancy

1 answers

Yogita Ingle 5 years, 7 months ago

Drawing against profit refers to the situation when the owner withdraw funds from the company, the funds withdrawn is taken out of profit generated from the operation (i.e., sales, etc.). These type of drawings does not affect in reduction of capital of entity. These types of drawings are not taken into considered for calculating interest on capital.

Drawing against capital is when the drawing is made in excess of profit generated by the firm from its operation. It reduces the capital of the firm and it is taken into consideration while calculating interest on capital.

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