The capital account of Benjie Maintenance, a sole trader, was credited with $15 000. Which of the following would not give rise to such a CR?
A) The business earned a profit of $15 000.
B) The owner purchased a family holiday valued at $15 000 using funds from the business.
C) The owner introduced $15 000 new capital.
D) The owner brought in his personal ride-on lawn mower (valued at $15 000) to be used by the business.

Question

Quizplus · Accepted Answer

Crediting the capital account with $15 000 means that there is an increase in the owner's equity in the business. Option A, C, and D can all result in an increase in the owner's equity. However, purchasing a personal family holiday using funds from the business (Option B) is not a legitimate business expense and does not result in an increase in owner's equity, hence it cannot be the reason for the credit to the capital account.

The Capital Account of Benjie Maintenance, a Sole Trader, Was