State BPA Fundamental Accounting Practice Exam

What doesn't result in recording an expense?

1. Withdrawal of cash by owner

2. Purchase of supplies

3. Payment of rent

4. Salaries payable

The correct answer is: Withdrawal of cash by owner

The withdrawal of cash by the owner does not result in recording an expense. When an owner withdraws cash from a business, it is typically considered a distribution of profits or a draw rather than an expense incurred by the business. This transaction reduces the owner’s equity within the business but does not impact the income statement since it is not categorized as an expense that affects profitability. In contrast, the purchase of supplies, payment of rent, and salaries payable all represent costs or liabilities that the business incurs in its operations. These transactions directly affect the income statement by decreasing the net income when expenses are recorded.