What is the result if the amount of profit for the year is less than the amount of the drawings?
A)The amount in the Cash account increases.
B)The amount in the Cash account decreases.
C)The Capital account decreases.
D)The Capital account increases.

Question

Quizplus · Accepted Answer

If the amount of profit for the year is less than the amount of the drawings, it means that the business is operating at a loss. This will decrease the Capital account because the losses will be deducted from the owner's equity. If the owner is withdrawing more money than the business is making, it will further decrease the Capital account. The Cash account may or may not be affected, depending on whether the owner is withdrawing more money than what is available in the account.

What Is the Result If the Amount of Profit for the Year