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Rs. 1500 withdrawn for personal use should be debited to ______
- a)Expense Account
- b)Purchases Account
- c)Sales Account
- d)Drawings Account
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
Rs. 1500 withdrawn for personal use should be debited to ______a)Expen...
Debiting Rs. 1500 withdrawn for personal use to Drawings Account is the correct accounting treatment. Let's understand why.
Explanation:
Personal withdrawals by the owner of a business are not considered as business expenses. Instead, these withdrawals are recorded in the Drawings Account. Drawings are the amounts that an owner withdraws from the business for personal use. It is a reduction of the owner's equity in the business. It is a contra equity account.
Drawings Account is a temporary account and is closed at the end of each accounting period. The balance of the Drawings Account is transferred to the owner's capital account in the balance sheet. The purpose of the Drawings Account is to keep track of the owner's personal withdrawals and to ensure that these withdrawals are not mistaken for business expenses.
Therefore, when an owner withdraws Rs. 1500 for personal use, it is debited to the Drawings Account. The journal entry for this transaction would be:
Drawings A/c Dr. 1500
To Cash A/c 1500
Conclusion:
To summarize, personal withdrawals by the owner of a business are debited to the Drawings Account. This helps in keeping track of the owner's personal withdrawals and ensures that they are not mistaken for business expenses.
Explanation:
Personal withdrawals by the owner of a business are not considered as business expenses. Instead, these withdrawals are recorded in the Drawings Account. Drawings are the amounts that an owner withdraws from the business for personal use. It is a reduction of the owner's equity in the business. It is a contra equity account.
Drawings Account is a temporary account and is closed at the end of each accounting period. The balance of the Drawings Account is transferred to the owner's capital account in the balance sheet. The purpose of the Drawings Account is to keep track of the owner's personal withdrawals and to ensure that these withdrawals are not mistaken for business expenses.
Therefore, when an owner withdraws Rs. 1500 for personal use, it is debited to the Drawings Account. The journal entry for this transaction would be:
Drawings A/c Dr. 1500
To Cash A/c 1500
Conclusion:
To summarize, personal withdrawals by the owner of a business are debited to the Drawings Account. This helps in keeping track of the owner's personal withdrawals and ensures that they are not mistaken for business expenses.
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Rs. 1500 withdrawn for personal use should be debited to ______a)Expen...
Because any cash or cheque withdrawn from the business for personal use is considered to be drawings by the proprietor and is debited to drawings account
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Rs. 1500 withdrawn for personal use should be debited to ______a)Expense Accountb)Purchases Accountc)Sales Accountd)Drawings AccountCorrect answer is option 'D'. Can you explain this answer?
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