Question

Withdrawal of cash from bank for official use will result into _____.

• A. Increase of assets
• B. Increase of expenses
• C. No impact on assets
• D. None of the above

Answer 1

Answer: (C)

No impact on assets

When a business owner withdraws cash from a company account, the value of company assets decreases because some capital reserves have been transferred from business to personal use. Although an owner draw affects the value of a company's assets, it is essentially unrelated to the part of the equation that calculates how much the business has earned through its sales and operations. Hence, This entry will have nil impact on assets since, on one hand cash A/c will increases and on the other hand bank A/c will decrease. The entry to be passed is
Cash A/c Dr.
To Bank A/c