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GCE Financial Accounting 1989 Question 12

Question 12

Final Accounts of a Sole Trader

The drawings account of a sole proprietor is transferred to the

  1. A.capital account
  2. B.debit side of the trading account
  3. C.credit side of the profit and loss account
  4. D.current liabilities in the Balance Sheet
  5. E.current assets in the Balance Sheet.
Show the answer and explanation

Answer: A (capital account)

Explanation

Drawings reduce what the business owes the owner, so they are deducted from capital.