CA Foundation · Accounting · Accounting Process
Goods worth Rs 12,000 were taken by the proprietor for personal use. What is the effect on the accounting equation?
Assets decrease by Rs 12,000 because stock leaves the business, and capital decreases by Rs 12,000 because the withdrawal is drawings. Liabilities are unchanged, so the equation stays balanced.
- AAssets decrease by Rs 12,000 and capital decreases by Rs 12,000Correct
- BAssets decrease by Rs 12,000 and liabilities decrease by Rs 12,000
- CAssets increase by Rs 12,000 and capital increases by Rs 12,000
- DCapital decreases by Rs 12,000 and liabilities increase by Rs 12,000
Explanation
Stock (an asset) falls by Rs 12,000 and Drawings are debited, which reduces capital by the same amount. Liabilities are unaffected, so the liability options are wrong.
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