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

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Study for the AAT Level 2 Introduction to Bookkeeping Test. Use flashcards and multiple choice questions with hints and explanations. Prepare effectively for your 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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