What Two Accounts Are Affected When A Business Pays Cash Or Sends Cheque / Check To The Owner For Personal Use
Cash Withdrawal Or Withdrew Cash By Cheque / Check From Business For Personal Use Of The Sole Owner / Sent Check To The Owner For Personal Or Private Use When a business owner withdrew cash or bank from business for his own personal use, then one account which is affected is cash account or bank account and other one is drawings account. Actually, a business pays cash or pays cash through check / cheque to sole proprietor from time to time due to personal or private use of owner of the business and in that case this transaction has no concern with business affairs according to Business Entity Concept . So, Drawings Account is created to record transaction related to personal expenses of the owner in order to separate this matter from business own’s accounts. Example: Mr. A is a sole proprietor withdrew cash Rs. 6000 from business for his own personal use. What is the journal entry and how this transaction affected the accounting equation? The journal entry to record for...