Cash of Rs. 2,000 is withdrawn for personal expenses. This will be deb...
Cash of Rs. 2,000 withdrawn for personal expenses will be debited to: A: Drawings A/c
The Drawings Account is used to record the owner's withdrawals from the business for personal use. In this transaction, since cash is being taken out of the business by the owner, the Drawings Account is debited, reflecting a reduction in equity, and the Cash Account is credited, reflecting a reduction in assets.
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Cash of Rs. 2,000 is withdrawn for personal expenses. This will be deb...
The correct answer is option 'A', Drawings A/c.
Explanation:
- Drawings A/c is an account that represents the withdrawals made by the owner for personal expenses.
- When cash is withdrawn from the business for personal use, it is recorded as a debit to the Drawings A/c.
- This indicates that the owner has taken out funds from the business for personal purposes.
- The Drawings A/c is a contra account to the Capital A/c, which represents the owner's investment in the business.
- By debiting the Drawings A/c, the owner's equity in the business is reduced.
To understand this better, let's look at the different options and why they are not the correct answer:
a) Drawings A/c:
- This is the correct answer because cash withdrawn for personal expenses is debited to the Drawings A/c.
b) Creditors A/c:
- Creditors A/c represents the amounts owed by the business to its suppliers or creditors.
- Cash withdrawals for personal expenses do not involve any payment to creditors, so this option is not correct.
c) Capital A/c:
- The Capital A/c represents the owner's investment in the business.
- Cash withdrawals for personal expenses do not affect the owner's capital investment, so this option is not correct.
d) Cash A/c:
- The Cash A/c represents the cash balance of the business.
- When cash is withdrawn for personal expenses, it is recorded as a debit to the Drawings A/c, not the Cash A/c.
- This is because the Cash A/c represents the business's cash transactions, while the Drawings A/c represents the owner's personal withdrawals.
- Therefore, this option is not correct.
In conclusion, when cash of Rs. 2,000 is withdrawn for personal expenses, it is debited to the Drawings A/c.
Cash of Rs. 2,000 is withdrawn for personal expenses. This will be deb...
Because whenever we withdraw cash from the business for Personal Use it will count as a drawing of the business.