PRC-1 · Chapter 1 · Question 49 of 100
The owner of 'Breeze Boutiques' pays her personal life insurance premium using a cheque drawn on the business bank account. According to the separate entity concept, how should this be recorded in the business books?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) As a debit to the Drawings account and a credit to the Bank account.
Explanation
Under the separate entity concept, personal expenses paid from business funds are treated as owner withdrawals. The correct entry is to debit Drawings and credit Bank.
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