Question

Explain the difference (4 points) Capital and Drawings.
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Answer 1

Answer:

Capital is the amount invested in the business in order to further grow it or which is invested in the business to start a new business. The term capital is used in case of Sole Proprietorship and Partnership while the term “Equity” is used in case of company or corporation while Drawings is the withdrawals by the owners of the business from the business for personal use. It is a Contra Equity Account which is deducted from the Capital or Equity of the business.

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