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Which of the following account is affected from the Drawings of cash in sole- proprietorship business?
  • a)
      Capital account
  • b)
      Shareholder account
  • c)
      Liability account
  • d)
      Expense account
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
Which of the following account is affected from the Drawings of cash i...
Answer:

  1. Introduction:


    • Drawings of cash refer to the withdrawal of cash by the owner of a sole-proprietorship business for personal use.


  2. Affected Accounts:


    • Capital account: The capital account of the sole proprietor is affected by the drawings of cash.


      • The drawings are considered as a reduction in the owner's equity in the business.

      • When cash is withdrawn, it decreases the capital account.

      • It represents the amount of money the owner has taken out of the business for personal use.



  3. Not Affected Accounts:


    • Shareholder account: Shareholder accounts are not relevant in a sole proprietorship business as it is the ownership structure of a corporation.

    • Liability account: Liability accounts represent debts and obligations to third parties, and drawings of cash do not affect them.

    • Expense account: Expense accounts represent the costs incurred in the normal course of business operations, and drawings of cash do not affect them.


  4. Conclusion:


    • The capital account is affected by the drawings of cash in a sole-proprietorship business.

    • Drawings of cash reduce the capital account, representing the owner's equity in the business.


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Most Upvoted Answer
Which of the following account is affected from the Drawings of cash i...
Capital account
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