If Taylor Willow, the owner of Willow Hardware proprietorship, uses cash of the business to purchase a family automobile, the business should record this use of cash with an entry to:
A) Debit Cash and credit T. Willow, Withdrawals.
B) Debit T. Willow, Withdrawals and credit Cash.
C) Debit Automobiles and credit Cash.
D) Debit Cash and credit Salary Expense.
E) Debit Salary Expense and credit Cash.

Question

Quizplus · Accepted Answer

When the owner of a proprietorship uses cash from the business for personal purposes, it is considered a withdrawal. Therefore, the entry should debit T. Willow, Withdrawals (which represents the owner's equity account) and credit Cash. Option A is incorrect because it debits Cash, which implies that the business received something in return for the cash, which is not the case. Option C is incorrect because purchasing an automobile is not an expense, but rather an asset purchase. Option D and E are irrelevant to the transaction.

If Taylor Willow, the Owner of Willow Hardware Proprietorship, Uses