Question

Rent of proprietor’s house paid from account on cash will?


(a) Increase capital
(b) Reduced the capital

(c) decrease the profit
(d) Increase the profit​

Answer 1

Answer:

(b) Reduced the capital.

Rent of proprietors house paid from account on cash will reduce the capital.

Explanation:

Rent paid in cash against personal property is drawings. All drawings are debited to the proprietor capital account.

As per the business entity concept of double entry book keeping, personal use and business use are two different aspects. All personal things should be seen separately from the business.

Any personal affects should be deducted from the capital in the form of drawings.