Question

Received Incometax Rs. 3500 is debited to capital account (rectification of errors)
​

Answer 1

Explanation:

Income tax paid by the proprietor is on the personal income of the proprietor as business do not have income. It is not a expenditure of the firm. It is a form of drawing by the proprietor and is deducted from the capital of the firm as it leads to outflow of proprietor's capital fund from the business.