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JAMB Principles of Accounts 2009 Question 6

Question 6

Accounting Equation

If Odukoya takes money out of the business bank account for his own private use, the effect of the transaction is

  1. A.increase in assets and increase in capital
  2. B.increase in assets and decrease in capital
  3. C.decrease in capital and increase in assets
  4. D.decrease in capital and decrease in assets.
Show the answer and explanation

Answer: D (decrease in capital and decrease in assets.)

Explanation

Drawings reduce the bank balance (an asset) and reduce the owner's capital.