Owners Capital

This topic has 3 replies, 2 voices, and was last updated 8 years ago by John Moffat.

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May 9, 2017 at 11:43 am #385485
Xairie
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Dear Sir, Will the Drawings of inventory Affect the Owners Capital?
May 9, 2017 at 3:30 pm #385501
John Moffat
Keymaster
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Yes – all drawings whether cash or inventory will reduce the final capital figure on the SOFP.
I stress this in one of the first of my free lectures!!
May 15, 2017 at 8:55 pm #386351
Xairie
Member
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How come? Purchases will b Credited Which Increases Profit and will Increase Capital.. Secondly Drawings ll b debited which decrease Capital.. So how come it decreases Capital?
May 16, 2017 at 12:48 pm #386448
John Moffat
Keymaster
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OK – the net effect will be zero, but they are two separate things.
Drawings themselves always reduce the capital.
Correcting the purchases figure will indeed increase the profit and hence the capital.
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