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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

When an owner withdraws cash or goods from the business, why is this considered an increase to the Drawing account and not an increase to the Wages Expense account?

To determine

Indicate the reason for the effect of withdrawal of cash or goods as an increase in the Drawing account, but not in the Wages Expense account.

Explanation

Owners’ equity: The financial interest of the owners to invest in the business is referred to as owners’ equity or capital. Owners’ equity comprises of capital, drawings, revenues and expenses.

Reason: The withdrawal of cash or goods are treated as reduction in owners’ investment...

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