Balance Sheet Account
State the balance sheet effects of each of the following (provide a explanation):
The owner withdraws R160 from the firm's bank account for his own use.
When the owner withdraws R160 from the firm's bank account for his own use, he will credit the bank account and debit the owner's draw account. This will effectively reduce the amount of current assets and owner's equity by R160.
The accounting equation is Assets = Liabilities + owner's equity. If before the withdrawal Assets is equal to 10160, Liabilities equal to 2000, and Owner's Equity equal to 8160 then you would have the equation 10160 = 2000 + 8160.
But after the withdrawal Assets is equal to 10000, Liabilities equal to 2000, and Owner's Equity equal to 8000 and you would have the equation 10000 = 2000 + 8000 showing the asset and owner's equity accounts having been reduced.
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