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Question

A withdrawal of cash from business by the proprietor of the firm should be credited to _____________.

A

Capital account

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B

Cash account

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C

Drawing account

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D

Proprietor's account

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Solution

The correct option is B Cash account
The transaction is based on the separate entity concept which signifies that business and its proprietor are treated two separate legal entity. Withdrawal of cash by proprietor should be debited to drawing account in the books of the business. Same amount should be credited by the proprietor in cash account.

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