How Is the Accounting Equation Affected When a Partner Withdraws

question 60

Multiple Choice

How is the accounting equation affected when a partner withdraws cash?

• A) Both equity and assets decrease; liabilities are not affected.
• B) Assets increase and equity decreases; liabilities are not affected.
• C) Both assets and liabilities decrease; equity is not affected.
• D) Liabilities decrease and assets increase; equity is not affected.

---

Definitions:

Salary Allowances

Specific amounts allocated regularly, often monthly, for salaries, including any adjustments for benefits or deductions.

Capital Account Increase

A rise in the value of an entity’s capital account, representing either an influx of capital or an increase in the overall value of the entity's assets.

Income and Losses

The financial results of a company's operations, with income indicating profit and losses reflecting expenses that exceed revenues.

Salaries

Payments made to employees for their services, typically expressed in terms of annual amounts but paid in installments like weekly or monthly.