The effect on the balance sheet when the owner withdraws money from the business is:
A) decrease asset bank; decrease equity.
B) increase drawings; increase equity.
C) decrease asset bank; increase equity.
D) decrease drawings; decrease equity.

Question

Quizplus · Accepted Answer

When the owner withdraws money from the business, it results in a decrease in the business's bank assets (since cash is being taken out) and a decrease in the owner's equity (as the withdrawal represents a reduction in the owner's claim on the business assets).

The Effect on the Balance Sheet When the Owner Withdraws