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Question

Cash withdrawn by the proprietor from the business for his personal use’ causes

A Decrease in assets and decrease in owner’s capital Correct Answer Incorrect Answer
B Increase in one asset and decrease in another asset Correct Answer Incorrect Answer
C Increase in one asset and increase in liabilities Correct Answer Incorrect Answer
D Increase in asset and decrease in capital Correct Answer Incorrect Answer

Solution

When the proprietor withdraws cash from the business for personal use, it results in a decrease in the cash asset since cash is being taken out of the business. At the same time, it also causes a decrease in the owner's capital because the owner's capital represents the owner's investment in the business. When the owner withdraws cash for personal use, it reduces their ownership interest in the business, leading to a decrease in owner's capital.

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