Final answer:
The double entry to record drawings of inventory by a proprietor is a debit to the drawings account and a credit to the inventory account, which decreases both the inventory asset and owner's equity. The entry reflects that assets have been taken out of the business for personal use.
Step-by-step explanation:
The double entry to record drawings of inventory made by a proprietor involves decreasing the inventory asset and recording the decrease as a draw from owner's equity. When a proprietor takes items from inventory for personal use, it's categorized as a draw or withdrawal, not as a sale. The entry on the books would involve a debit to the draws account, which is a contra-equity account that reduces the owner's equity, and a credit to the inventory account, signifying a reduction in the company's assets.
Example of Double Entry for Drawings
If a proprietor withdraws inventory valued at $1,000 for personal use, the bookkeeping entries would be:
Debit Drawings account: $1,000
Credit Inventory account: $1,000
This reflects the decrease in inventory and indicates that the owner has equity has been decreased by the value of the inventory withdrawn. It is crucial to keep such transactions separate from the business's sales and expenses to ensure accurate financial records.