Question

An owner withdrawal of $20,000 would_______.

A. decrease owner’s equity and increase assets by $20,000
B. increase owner’s equity and decrease liabilities by $20,000
C .increase liabilities and assets by $20,000
D. decrease assets and owner's equity by $20,000

Answer 1

An owner who withdraws an amount of $20000 would lead to decrease in the assets and the owner's equity by $20000.

Answer: Option D.

Explanation:

Assets are the things which are owned by the owner of the organisation and provide economic benefits. Liabilities are things which are the obligation on the owner of the company that he has to pay off. Equity is the share of the share holder of the company.

If an owner with draws or takes out money from the business for the personal use, it would lead to the decrease in the amount of the assets of the owner. It would also lead to the decrease in the amount of equity of the owner because he has taken out his share from the business for his personal use and not for the business.