Question

income tax liability paid of proprietor was paid out of petty cash book journal entry ​

Answer 1

§ For a Sole Proprietor, income tax is not an expense incurred to generate revenue hence it is not treated as an expense to be paid out of profits. In this case, income tax is treated as a personal expense resulting in drawings from the business concluding to a reduction of capital.

Answer 2

Answer:

The drawings account will be debited and the Petty cash book will be credited in the journal book.

Explanation:

Drawings a/c                    Dr.  xxx

To petty cash book                                                xxx

(being income tax paid)

• Journal refers to books of original entries.

• In which monetary transactions are noted down for the first time in chronological order.

• The word Jour in Journal is derived from the French word which means diary.

• A journal is a daily record book in which daily transactions are recorded for the first time.

• A journal records both debit and credit aspects of transactions according to the double entry system.

• It provides a basis for posting into the ledger.

• The transactions are recorded on a permanent basis which acts as evidence in case of emergency.

• Each entry in the journal is followed by a brief explanation of the transactions which is called Narration.

#SPJ2