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SSC Financial and Cost Accounting P-1 QUESTION #6083
Question 1

Which of the following statements regarding drawings is/are correct?

  1. They represent a decrease in the owner's investment in the business.
  2. They must always be less than the total profit for the year.
  3. They constitute the salary paid to the owner.
  • 1 and 2
  • 1 only✔️
  • 2 and 3
  • 3 only
Correct Answer Explanation

Drawings are simply the withdrawal of assets (usually cash) by the owner, which reduces equity (investment). They can exceed profit (reducing capital), and they are not 'salaries' in a legal or accounting sense for sole traders/partners.