What is Prive

Recording all transactions in a company or business is a mandatory activity. The recording of such transactions includes income and sales proceeds to expenses and purchases of raw materials. With the recording of all transaction activities, then the cash flow can be fully known and able to show the actual financial condition of the business. One type of expense that is often missed and lacking in financial statements, especially small businesses, is prive.

In Accounting Economics, a prive is an expense that occurs due to the withdrawal of money made by business owners. Since it takes a portion of the assets owned by the business, then such withdrawal of money if not tracked could be considered as a loss of profit with a considerable value for a short time. 

In this article symbianer will know the meaning of prive the effect of prive on accounting recording the characteristics of prive in price category accounting how to calculate the how to manage price wisely. Check out the full explanation of prive in accounting below.

What is Prive in Accounting

A Prive is an acquisition of capital or assets in a business. The capital withdrawal is used for the personal needs of the business owner in question. In individual businesses or partnerships, withdrawal transactions can be done traditionally. 

While in large companies, usually withdrawal transactions are referred to as distribution activities. When the business owner withdraws money from the company for personal needs or use, the company will take funds from the model.

This is quite reasonable because basically the business owner has shares in his or her own company. The owner is able to obtain cash funds in exchange for the ownership of part of his capital in the company. 

Then the company will record journal entries related to the withdrawal of funds by the owner by debiting the withdrawal by the owner and crediting cash. The withdrawal of funds by the owner is included as equity or temporary capital account closed on the capital account of the owner at the year-end listing.

Effect Of Prive On Accounting Records

Accounting records also have to do with prive accounts, which is the process of recording any withdrawal of funds or capital from the owner. The withdrawal can be in the form of assets, especially in the form of money, and then withdrawn through businesses and companies by the owner to meet his personal needs. 

Then what is included with withdrawal in a business? Withdrawal or withdrawal in a business involves assets that are not only in the form of money or cash.

The withdrawal of these assets is owned by the company and is also included as one of the assets that can be withdrawn from a business by the owner who aims to meet his personal needs. Therefore, the withdrawal or prive can also be equipment or products that are not sold and taken from inventory, and for personal use on the part of the owner.

Characteristics Of Prive In Accounting

One of the functions of prive account recording is to maintain the stability of the company's capital balance. Therefore, it has some characteristics in accounting. Reported by the business site, here are some characteristics of prive accounts. 

a. Track Capital Spent On Personal Needs.

Through the prive account, symbianer can track the total capital or expenses withdrawn from the business by the owner for personal needs. This can facilitate supervision related to the withdrawal of funds by business owners also ensure that the total capital balance owned by the company is maintained and in accordance with the cash flows that have been recorded.

b. Not Included As A Permanent Account Or Ongoing Account.

Prive accounts do not include permanent or ongoing financial records. At the end of the period in the financial year, the prive account is balanced with a credit on the general ledger. Then the balance will be sent to the amount of capital or equity side of the business owner from the balance sheet and included in the debit type.

This withdrawal account can only be used in the following year to track withdrawals from the business in the previous year or period. Therefore, this type of account is not included as a permanent account or a continuous account and is only a temporary account in financial accounting.

c. Not Included As An Expense Account On A Business.

The last characteristic of the prive account is that it is not included as an expense account, although it is a reduction in the total funds available to a business or company. The reason is that withdrawals made by business owners are not included as expenses from business activities. It is simply a reduction in the amount of business equity used for the owner's personal needs. If the prive account is used as an expense account, the recording will only be written on the company's income statement and not on the balance sheet. 

d. Recording Of Prive In The Statement Of Changes In Capital.

Withdrawal of capital as receivables, so investors are obliged to return the capital or money they withdraw. This requires commitment in order to prevent disruption to the company's capital.

Record each withdrawal as a capital reduction. It is necessary to do this if the investor withdraws or reduces capital directly.

Excluding the prive from the income statement, the withdrawal of the debit does not enter into profit or loss, but rather as a capital deduction taken directly from the capital. So withdrawal is considered an out-of-activity activity.