Question

Drawing by a sole trader are ________________.

• A. Withdrawal of capital
• B. Liability
• C. Expenses
• D. Revenue

Answer 1

The correct option is A Withdrawal of capital

Drawing is that amount which the owner of a business withdraws for his personal expenses.

When a sole proprietor withdraws money for his personal expenses it is considered as an appropriation to profit. This means that the amount of drawings are to deducted from the profits of business.

Such expenses are deducted from profit because the profit earned is the only income for sole trader and thus drawing expense has to be deducted from his profiits.