Owner's Personal Use of Inventory

by Sharon
(Saskatchewan, Canada)

I have been making a general journal entry each month to document owner's draw.


I understand how cash is to be entered, but not how personal use of inventory is to be entered. This is an example of the monthly entry I've been making

Dr. Owners Withdrawal
Cr. Cash
Cr. Inventory - gas
Cr. Inventory - parts
Cr. Inventory - confectionery

We count our inventory at year end and make adjustments to COGS and inventory accounts then.

My question is, am I doing this right? Or should I be including the revenue and/or expense accounts related to the inventory accounts?



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Looks good to me Sharon.

There is no revenue involved because there was no sale of these inventory items ... they were just consumed by the owner.

If your accountant wants it done differently, they will either let you know at year-end ... or you'll see an adjusting entry of some kind.

If you don't want to wait until year-end, you can call and ask your accountant if it's okay to handle these personal use items this way.

Comments for Owner's Personal Use of Inventory

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Oct 03, 2010
Thank you
by: Sharon

Thanks Laura.

This has been one entry each month that has been bugging me since January! I thought that it was the correct entry, but couldn't find anything anywhere that said it was.

Sometimes I tend to "overthink" things. Now that I know I'm on the right track it really helps. You have a great site, and I'm sure I'll be referring to it often.

Oct 03, 2010
Personal Use of Inventory
by: Bookkeeping Essentials

Sharon,

If you are using QuickBooks, I should mention that a journal entry may muck things up.

See how Esther Karp suggests making inventory adjustments in QuickBooks.

Just change her advice from the appropriate expense account for obsolescence, demonstration samples or giveaways to owner's draw ... but still make the "sale" at $0 to remove the inventory without creating a sale.

Feb 06, 2012
Use My Collection as Business Inventory
by: Corinne, Halifax, NS, Canada

How do I add items from my personal collection to be used as inventory for my new antiques business?

The items will need to be restored before being sold.

Can I just give the items to the business, a sole proprietorship?



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Corinne, you need to sell them to the business at fair market value (FMV). Click here to read about it ... look in the box titled Capital Assets and ITCs ... pay close attention to the notes about change of use rules AND CCA available for use rules.

Consider registering for GST/HST at the start so you can claim your ITCs relating to your business.

Good luck and much success with your business!

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