If Taylor Willow,the sole stockholder of Willow Hardware,uses cash of the business to purchase a family automobile,the business should record this use of cash with an entry to:
A)Debit Salary Expense and credit Cash.
B)Debit Cash and credit Salary Expense.
C)Debit Cash and credit Dividends.
D)Debit Dividends and credit Cash.
E)Debit Automobiles and credit Cash.

Question

Quizplus · Accepted Answer

When a sole stockholder of a business uses business cash for personal use, it is treated as a withdrawal of equity, typically recorded as dividends. Therefore, the correct entry is to debit Dividends (increasing the dividends account, which reduces equity) and credit Cash (decreasing the cash asset).

If Taylor Willow,the Sole Stockholder of Willow Hardware,uses Cash of the Business