ICAEW AF · Chapter 12 · Question 3 of 11
How are a sole trader's drawings presented in the financial statements?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) As a deduction from capital in the statement of financial position
Explanation
Drawings are withdrawals of resources by the owner, not expenses of the business. They are deducted from the owner's capital, together with the addition of profit, in the capital section of the statement of financial position. Treating them as an expense would understate profit.
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