On January 15, the owner of a sole proprietorship withdrew $2,000 cash for personal use from the business. This entry will be posted to the ledger as explained below.
A ledger is an accounts book or collection that records accounting transactions.
- Each account has an opening or carry-forward balance.
- Each transaction would be recorded as a debit or credit in separate columns, as well as the ending or closing balance.
The ledger is a permanent summary of all amounts recorded in supporting journals, which record individual transactions by date.
Every transaction always passes through a journal and into one or more ledgers.
The company's financial statements are developed from ledgers' summary totals.
Since the proprietor withdrew cash in the given case, it will lead to a decrease in cash and his equity.
Since we will assume he is withdrawing to invest elsewhere.
Therefore, a decrease in cash will be shown by posting $2000 on its credit side, and subsequently, a decrease in capital/equity will be shown by posting $2000 on its credit side.
Hence, this entry is posted to the ledger by decreasing both cash and equity/capital accounts with the same amount which is $2,000.
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