(a) State three effects of drawings on the business of a sole proprietor.
(b) Explain how the following items are treated in the balance sheet:
i. accrued expenses
ii. prepaid expenses
iii. accrued income.
(a) The effects of drawings on the business of a sole proprietor are:
i. They decrease the stock of goods available
ii. Lead to capital reduction.
iii. Lead to a reduction in cash flows.
iv. Reduce the profit of the business
v. Reduce the fixed assets of the business
vi. Slow down the growth of a business.
vii. May lead to the collapse of the business.
(b) Treatment in the Balance Sheet;
i. Accrued expenses: These are treated as accruals under the current liabilities in the balance sheet.
ii. Prepaid expenses: These are treated as current assets in the balance sheet.
iii. Accrued income: This is treated as a current asset in the balance sheet.
Contributions ({{ comment_count }})
Please wait...
Modal title
Report
Block User
{{ feedback_modal_data.title }}