Money the owner takes out of the business — a reduction of equity, not an expense.
An owner's draw is money the owner takes out of the business for personal use. It reduces the owner's equity — it is not a business expense, does not reduce profit, and doesn't belong anywhere on the P&L.
Recording draws as expenses is one of the most common small-business bookkeeping errors, and it quietly understates profit. How owners properly pay themselves depends on the business structure: sole proprietors and most single-member LLC owners take draws; owners of corporations (including S corp owner-employees) generally take a payroll salary, possibly plus distributions. Structure questions belong with a tax professional.
The owner transfers $3,000 to their personal account: debit Owner's Draw (an equity account), credit Cash. Profit for the month is untouched — the owner took out some of what the business had already earned.
Owner's Equity · Retained Earnings · Net Profit — or browse the full plain-English glossary.
Reading a definition is the easy part — the Daily Challenge (ten questions a day, free, no signup) is how terms like this become reflexes. Going for certification? Start with the free ProAdvisor readiness check.