The owner’s personal electricity bill of Rs. 9,000 is paid from business cash. How should this payment be treated?
Correct answer: C. As drawings by the owner
- A. As a trade creditor payment
- B. As a business electricity expense
- C. As drawings by the owner
- D. As an addition to business capital
Explanation
A personal bill paid from business funds reduces the owner’s interest in the business, so it is treated as drawings. It is not a business expense because it does not relate to earning business revenue.
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About Incomplete Records
Incomplete records require profit and financial position to be reconstructed when a complete double-entry system is unavailable. Methods include statements of affairs, capital comparisons, control accounts, cash summaries and margin calculations to find missing sales, purchases, expenses, assets, liabilities and drawings, while distinguishing business profit from changes in capital.
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