State BPA Fundamental Accounting Practice Exam

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Prepare for the State BPA Fundamental Accounting Exam with interactive flashcards and multiple choice questions. Each question comes with hints and explanations. Ace your exam with confidence!

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In what type of account is the owner's withdrawal recorded?

Asset account
Liability account
Capital account
Withdrawal account

The correct answer is: Capital account

The owner's withdrawal is recorded in a withdrawal account, typically classified under the capital account. This account specifically tracks any distributions or withdrawals made by the owner from the business. These withdrawals reduce the equity of the owner in the business, directly affecting the overall capital position. Recording withdrawals in a designated account helps to clearly differentiate them from regular business expenses or liabilities. This enables a clear understanding of how much the owner has taken out of the business, which is crucial for maintaining accurate financial records and determining the net worth of the owner's investment in the business. The use of a withdrawal account also allows for easy tracking of equity changes resulting from owner transactions.