During the preparation of the worksheet, the $5,000 balance of the Sam, Withdrawal account was extended as a debit to the income statement columns. This error will:

Question

Quizplus · Accepted Answer

Withdrawals by the owner (Sam's Withdrawal) are not expenses but distributions of equity. Extending this as a debit to the income statement columns incorrectly reduces net income, thus understating it by $5,000.

During the Preparation of the Worksheet, the $5,000 Balance of the Sam