A Proprietor Makes a Cash Withdrawal from the Proprietorship

question 32

Multiple Choice

A proprietor makes a cash withdrawal from the proprietorship.How does this affect the accounting equation?

• A) This has no effect on assets, liabilities, or owner's equity.
• B) Assets decrease; owner's equity decreases.
• C) Assets increase; liabilities decrease.
• D) Assets decrease; owner's equity increases.

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Definitions:

Equity Account

An account representing the owner's or shareholders' interest in a company, reflected in the capital stock, retained earnings, and contributed surplus on the balance sheet.

Unearned Revenue

Money received by a company for products or services yet to be delivered or performed, recorded as a liability on the balance sheet until earned.

Retained Earnings

The segment of net income that is not issued as dividends, reserved by the company for reinvestment in its essential business or for settling debts.

Asset Account

Accounts used in accounting to track the resources owned by a company that have future economic value.