Owner’s Equity account (Capital Account)
If a firm is to set up and start trading,
then it needs resources.
The amount of the resources supplied by the
owner is called capital.
Capital can
be in the form of money or objects
(assets).
Drawings
Sometimes the owner will take cash or goods out of the business for
his private or personal use, this is known as drawings. These drawings will reduce capital.
All withdrawals of cash or goods by the owner
(proprietor) for his own use are debited to the
drawings account
J Drew cash for personal use: Cash account is credited to
show the cash paid out.
J Drew goods for
private use: Purchases account is credited to show the reduction
in the goods purchased for
resale.
Homework for S3C, S3B and S2B
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