A proprietor makes a cash withdrawal from the proprietorship.How does this affect the accounting equation?

Question

Quizplus · Accepted Answer

When a proprietor makes a cash withdrawal, it means that the owner is taking money out of the business for personal use. This reduces the amount of cash available in the business, which in turn reduces the total assets of the business. At the same time, it also reduces the equity of the owner, as they are taking out money that they had invested in the business. Therefore, the correct choice is B - Assets decrease, and owner's equity decreases.

A Proprietor Makes a Cash Withdrawal from the Proprietorship