New Zealand Journal entry for revenue and expenses

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Nov 9, 2022
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Hi there,

I work for a small accounting firm and a few times I have seen this journal entry where the revenue is closed to expenses & drawings.
Eg.

...….................. Dr............ Cr
Expenses....... 40
Withdrawals...30
Revenue......................... 70

Can someone please explain this to me. Your help is much appreciated.
Thankyou
Charlotte
 

DrStrangeLove

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Is this a sole proprietorship or a partnership? This entry strikes me as...squiffy. Is this the entire entry? There are no other lines in the entry?

Essentially, someone is withdrawing income as soon as it's booked. I don't think that's cricket, especially if it's a partnership.

My paranoid side makes me think they're plumping the income reported by the business, essentially recording income that doesn't exist in a way that doesn't affect the balance sheet. They can't close Revenue/Expenses to any assets or liabilities, so they close it to Withdrawals to balance out the plumping.
 
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