01-09-2005, 04:12 AM
Dear Shahid
Please donot read the explanations written within brackets next to the terms in CAPS if you already know them.
Based on the the BASIC 5 categories, Drawings fall under CONTRA LIABILITIES. An even more basic category would be CONTRA CAPITAL.
This raises another question as to what is Capital. Well if we are talking in context of a LIMITED COMPANY(a separate legal entity) then there are TWO different kinds of liabilities, namely External Liabilities and Internal Liabilities. By external liabililties we mean Obligations to transfer ASSETS(existing or future economic benefits) to a person(a separate entity) other than the SHAREHOLDERS/DIRECTORS of the company for e.g. Trade Creditors etc. By internal liabilities we mean obligations to transfer assets to the SHAREHOLDERS/DIRECTORS. Please note that in both the cases viz Liabilities or Share Capital there is an element of OBLIGATION TO TRANSFER ASSESTS and that is what constitutes LIABILITY.
I hope the above basic definition of Liability will help you understand the concept of Drawings.
By the way CONTRA means REVERSE or OPPOSITE OF.
Kind Regards
"You don't get to choose how you're going to die. Or when. You can only decide how you're going to live. Now."
Please donot read the explanations written within brackets next to the terms in CAPS if you already know them.
Based on the the BASIC 5 categories, Drawings fall under CONTRA LIABILITIES. An even more basic category would be CONTRA CAPITAL.
This raises another question as to what is Capital. Well if we are talking in context of a LIMITED COMPANY(a separate legal entity) then there are TWO different kinds of liabilities, namely External Liabilities and Internal Liabilities. By external liabililties we mean Obligations to transfer ASSETS(existing or future economic benefits) to a person(a separate entity) other than the SHAREHOLDERS/DIRECTORS of the company for e.g. Trade Creditors etc. By internal liabilities we mean obligations to transfer assets to the SHAREHOLDERS/DIRECTORS. Please note that in both the cases viz Liabilities or Share Capital there is an element of OBLIGATION TO TRANSFER ASSESTS and that is what constitutes LIABILITY.
I hope the above basic definition of Liability will help you understand the concept of Drawings.
By the way CONTRA means REVERSE or OPPOSITE OF.
Kind Regards
"You don't get to choose how you're going to die. Or when. You can only decide how you're going to live. Now."
