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Similarities:
- Both are amounts paid by the entity to the owners of the company.
- Both result in the utilization of funds to lessen the equity (capital)
- Both are a way of paying back the owners of the entity for their investment. It can be the benefit or return.
Differences:
- Dividends are generally paid out of the profits of the company, while drawings may or may not be from the profits
- Dividend payment affects the price of shares but in case of drawings it is not applicable.
- Dividend payouts are carefully decided based on the financial position of the company and its cash requirements. Drawings are personal withdrawal of funds by the proprietor.
