Owner Contributions and Distributions Quiz

Questions and Answers

Which of the following is an Owner Contribution? (Select all that apply)

An expense that the owner pays for personally for the business (correct)

An asset that the owner gives to the business (correct)

A deposit from the owner to the business (correct)

None of the above

What accounts are affected when preparing the journal entry for an Owner Contribution of a Fixed Asset?

Debit Fixed Asset, Credit Owner Contribution

Which of the following is an Owner Distribution? (Select all that apply)

An asset that the owner takes from the business for personal use (correct)

Money the owner takes out of the business outside of payroll (correct)

A fixed asset contributed by the owner

All of the above

What type of account is the Owner Distribution account?

Equity Signup and view all the answers

What accounts are affected when an Owner receives a Fixed Asset from the business, assuming no accumulated depreciation of the asset?

Debit Owner Distribution, Credit Fixed Asset Signup and view all the answers

What is Retained Earnings?

The cumulative earnings from all previous years Signup and view all the answers

What is the purpose of closing the Owner Distribution account each year?

So that the amount distributed in the current year is clear on the balance sheet Signup and view all the answers

What accounts are affected when you prepare an Owner Distribution closing entry to Retained Earnings?

Debit Retained Earnings, Credit Owner Distribution Signup and view all the answers

Study Notes

Owner Contributions

Owner Contributions refer to expenses paid personally by the owner for the business.
They can also include assets given to the business by the owner.
A deposit made by the owner into the business qualifies as an Owner Contribution.

Journal Entry for Owner Contribution of Fixed Asset

When recording an Owner Contribution of a Fixed Asset, the Fixed Asset account is debited.
The Owner Contribution account is credited during this transaction.

Owner Distributions

Owner Distributions include assets taken from the business by the owner for personal use.
They also encompass money withdrawn from the business that is not categorized as payroll.

Owner Distribution Account Type

The Owner Distribution account falls under the category of Equity accounts in the financial statements.

Journal Entry for Owner Receiving Fixed Asset

In the case of an Owner receiving a Fixed Asset from the business, the Owner Distribution account is debited.
The Fixed Asset account is credited in this transaction, assuming no accumulated depreciation exists.

Retained Earnings

Retained Earnings represent the total cumulative earnings accumulated from all previous fiscal years within the business.

Closing the Owner Distribution Account

Closing the Owner Distribution account annually ensures clarity regarding the distributed amount in the current year's balance sheet.

Closing Entry to Retained Earnings

When preparing the closing entry for Owner Distribution to Retained Earnings, the Retained Earnings account is debited.
The Owner Distribution account is credited to reflect the transfer.

Description

Test your understanding of owner contributions and distributions in business accounting. This quiz covers journal entries for both contributions of fixed assets and distributions made for personal use. Learn how these transactions affect equity accounts and the overall financial statements.