Which action decreases an owner's capital account balance?

Which action decreases an owner's capital account balance?

• A. Credit the account
• B. Increase the account
• C. Decrease the account
• D. Debit the account

Answer: (D)

Owner's equity accounts, like the capital account, have a normal credit balance: credits increase them and debits decrease them. So to reduce the owner's capital, you record a debit to the capital account. This reflects a drop in ownership equity, such as when the owner withdraws funds or the business incurs losses. Conversely, crediting the capital account would increase it, which is opposite of what’s being asked. Saying you would “decrease” the account describes the effect, but the specific action that achieves that decrease is a debit.

Owner's equity accounts, like the capital account, have a normal credit balance: credits increase them and debits decrease them. So to reduce the owner's capital, you record a debit to the capital account. This reflects a drop in ownership equity, such as when the owner withdraws funds or the business incurs losses. Conversely, crediting the capital account would increase it, which is opposite of what’s being asked. Saying you would “decrease” the account describes the effect, but the specific action that achieves that decrease is a debit.