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.

Question

Business

Williamson

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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Freddy Dennis · Answer 1

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.