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Homework answers / question archive / Owner withdraws $2,400 of cash for personal use
Owner withdraws $2,400 of cash for personal use.
For the transaction above, complete the following:
a. Select the accounts that are affected.
b. Are the selected accounts increased or decreased?
c. What is the dollar amount of change in the accounts?
d. If Equity is selected, choose the reason that it has changed.
Answer:
a) The accounts that are affected include assets and owner's equity.
Journal entry:
| General Journal | Debit | Credit |
| Drawings | $2,400 | |
| Cash | $2,400 |
With this entry, the debit to drawings is transferred to equity account reducing the capital account balance and as cash is credited to be reduced.
b) The selected accounts decrease.
The owner's equity has a credit balance and when drawings are transferred to it, it is reduced.
The cash is an asset account and is reduced with a credit entry.
c) The dollar amount of change in the accounts is $2,400.
d) The equity account is changed because when the cash is invested in the business by the owner, the owner's capital account is credited, but when the cash is withdrawn by the owner for personal use, the owner's capital has to be reduced to the extent of drawings.
