Is withdrawal an expense or income?

Okay, so, is a withdrawal an expense… or income? I remember being totally confused about this when I first started my little side hustle, and honestly, sometimes it still trips me up a little!

Basically, the short answer, and what I’ve seen pop up as the “featured snippet” all over the place, is: Withdrawals? They’re not business expenses. Nope. Think of it this way: it’s when the owner (that’s you!) takes money or, like, assets from the business for personal use. Like, say you use the company credit card to buy groceries because your fridge is totally empty (guilty!). That’s a withdrawal.

Instead of being an expense – something that helps your business make money – a withdrawal actually lowers the owner’s equity. What’s equity? Well, it’s basically your stake in the company. So, when you take money out, you’re reducing that stake, right?

And here’s the other kicker: it’s definitely not income. You’re not earning anything. You’re just… taking. It’s like, I took $100 from my business account last week to treat myself to a massage (don’t judge!). That wasn’t income, that was me raiding the cookie jar, plain and simple. Reduced my equity for the month, but boy was it relaxing! So, not income, got it? I hope that makes sense. I’m still learning all this accounting stuff, but that’s how I understand it, anyway!