Question

4. Income tax paid by a sole proprietor on his business income should be:
a) Debited to trading account b) Debited to profit and loss account c) Deducted from capital account in
the balance sheet d) None of the above
5. All direct & indirect expenses related to business are charged:​

Answer 1

Answer:

1) In sole proprietorship, all profits are transferred to the owner. Income tax is a personal tax which need to be paid by the individual in case of proprietorship.

This will be considered as personal expense or drawings and should be deducted from the capital a/c.

2)Indirect expenses that are not directly associated but related to the business are to be charged to the profit & loss account to know the net profit.

mrk me as brainlest and follow me

Answer 2

Answer:

The correct option is (c) Deducted from capital account in the balance sheet.

Explanation:

• Income tax is a personal expense of an sole proprietor.
• Under separate entity concept, Business man and the business are considered as two separate entities. The books of accounts of the business record the business transactions only.

• If this personal expense, i.e. Income tax, is paid by business, it shall be considered as drawings on the part of the sole proprietor.

• Drawings are deducted from the Capital A/C.

Hence, Income tax paid by sole proprietor shall be deducted from Capital A/C in balance sheet.

#SPJ3