Question

The beginning capital balance shown on a statement of owner's equity is $100,000. Net income for the period is $50,000. The owner withdrew $25,000 cash from the business and made no additional investments during the period. The owner's capital balance at the end of the period is:

Answer 1

Answer:  $125,000

                         

Explanation: In simple words, owner's equity refers to the funds that are contributed by the owners of the capital for effectively conduction the operations of the business.

Any profit that the organisation made during a year is treated as a return to the capital and is added to the initial capital while drawing from the capital results in decrease in the available fund for operations.

   Hence the year end balance of the capital in given case is, $1000,000 + $50,000 - $25,000 = $ 125,000