For-profit companies exist to provide value, namely profit distribution and market value increases, to their owners. Most small businesses solely derive benefits via distribution of the final number shown on a net income statement -- profit. The distribution of this profit to owners is referred to as owner's withdrawals or distributions. Owner's withdrawals are shown on a company's balance sheet.

Owner Withdrawals

Owner withdrawals are the distributions that you as a business owner -- sole proprietor, member, partner or shareholder -- take from your business's retained earnings for personal use. The actual payment is made from your company's cash flow or cash account. Withdrawals may occur on a regular basis or annually, depending on how your company's ownership agreements address the subject. Withdrawals by owners who are shareholders in a C corporation are typically referred to as dividends.

Balance Sheet

The balance sheet is one of your company's primary financial statements. It provides a financial picture of your company at a specific point in time and shows what your company owns or owes at that time. The balance sheet shows assets, what your company owns; liabilities, what your company owes; and owner's equity. On a balance sheet, assets plus liabilities equal owner's equity. Owner's equity reflects what you, any co-founders or investors contributed to the company. It also includes retained earnings and reflects any distributions made to the owners.

Owner's Equity

Your owner's equity account increases or decreases each year by the amount of net income or net loss from prior years, which gets reflected in retained earnings. It decreases by the amount you withdrew as an owner throughout the year. Owner's equity equals owner contributions -- both initial contributions and any additional paid-in capital to cover losses or to pay for expansion -- plus retained earnings less distributions or withdrawals. If you frequently withdraw from owner's equity, you can track your owner's equity separately and update your balance sheet on a more periodic schedule -- quarterly, for example.

Cash Flow Statement

Although your owner withdrawals are a balance sheet item and do not appear on your company's net income statement, they do appear on your cash flow statement. If you utilize a cash-based accounting system, you do not need a separate cash flow statement. However, if you utilize an accrual system, where you recognize revenue when invoiced and expenses when incurred, a cash flow statement provides significant insight. Any owner withdrawals are tracked in the financing section, which shows all debt and equity transactions.