My old email friend Vicki wrote with a problem concerning the entity concept. Here is how I answered Vicki's question. Dear Vicki, All the entity concept tells you is written here Entity Concept at www.duncanwil.co.uk. The addition of the word separate is not important since the separate entity concept is the same as the entity concept! In terms of the situation you are now dealing with, Sophia Smythe, the issue is how the accountant should treat the £2,500 of goods that she has withdrawn for her own use. What you might be suggesting is that this has happened: Debit Cost of Goods Sold a/c £2,500 Credit Stock a/c £2,500 This takes the goods into cost of goods sold and therefore the trading and profit and loss account and therefore it has an effect on profit, reducing it by £2,500. What should have happened is this: Debit Drawings a/c £2,500 Credit Stock a/c £2,500 The effect of this transaction is really that Sophia has effectively withdrawn the £2,500 worth of goods from her capital and the effect of that should be shown directly in the capital account that now falls by the full amount. The profit/loss should be unaffected by this transaction and when you make these adjustments you will see that profit increases by £2,500. I hope this is clear … let me know if not. Best wishes as ever