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What Are "Drawings" and What Is Their Treatment

Question 23

Multiple Choice

What are "Drawings" and what is their treatment?

A) "Drawings" are amounts taken out of the business for personal use by the owner of the business. They are not shown on the Income Statement, but at the bottom of the Statement of Financial Position.
B) "Drawings" are amounts taken out of the business for personal use by the owner of the business. They reduce the profit of the business.
C) "Drawings" are amounts taken out of the business for personal use by the owner. As most drawings are cash, they reduce the cash available to the business. They also reduce profits.
D) "Drawings" is when the business owes money to the owner of the business. It is part of the Capital of the business. Drawings should be kept to a minimum to avoid potential cashflow problems.

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