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3 October, 23:42

For each of the following situations with regard to owner's contributions and withdrawals of the business, compute the amount of net income or net loss during June 2016. a. The owner contributed $ 10 comma 000 to the business and made no withdrawals. b. The owner made no contributions. The owner withdrew cash of $ 4 comma 000. c. The owner made contributions of $ 5 comma 000 and withdrew cash of $ 22 comma 000.

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  1. 4 October, 02:18
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    the owners contribution does not affect the profit and loss of the entity and with drawl has impact on Total Equity.

    As per the simple Rule

    Assets = Equity+Liability

    Equity constitutes = Undistributed profit till date + Share capital

    A) Entries

    Cash Debit 10000

    Share Capital 10000

    So you can see in above entry it does not affect the income and loss

    b)

    Undistributed profit or Equity 4000

    Cash 4000

    with drawl will decrease the total equity by 4000.

    C)

    Cash 5000

    Undistributed profit or Equity 17000

    Cash 22000

    with drawl will decrease the total equity by 17000.
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