Which account is typically increased when a owner adds personal funds to the business?

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Prepare for the AAT Level 2 Bookkeeping Test with flashcards and multiple choice questions. Each question includes hints and explanations to improve your understanding and readiness for the exam.

Multiple Choice

Which account is typically increased when a owner adds personal funds to the business?

Explanation:
When the owner adds personal funds to the business, it’s a capital injection that increases the owner’s equity. The cash in the business rises, and the corresponding entry goes to the Capital (owner’s equity) account. This is why the Capital account increases. Drawings would be withdrawals and would reduce capital; expenses are costs, and revenue is income.

When the owner adds personal funds to the business, it’s a capital injection that increases the owner’s equity. The cash in the business rises, and the corresponding entry goes to the Capital (owner’s equity) account. This is why the Capital account increases. Drawings would be withdrawals and would reduce capital; expenses are costs, and revenue is income.

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