The Net Income of Sarah for the year is $25,000. The withdrawals Sarah made during the year amounted to $30,000. Which of the following statements is true of effect of these transactions on Sarah, Capital?
A)Sarah, Capital account decreases by $25,000.
B)Sarah, Capital account decreases by $5,000.
C)Sarah, Capital account increases by $30,000.
D)Sarah, Capital account increases by $25,000.

Question

Quizplus · Accepted Answer

Sarah's Capital account decreases by the difference between her withdrawals and net income, which is $5,000 ($30,000 - $25,000).

The Net Income of Sarah for the Year Is $25,000