The drawings account of a sole proprietorship is transferred to the

The drawings account of a sole proprietorship is transferred to the

Answer Details

In a sole proprietorship, the owner can withdraw funds from the business for personal use. These withdrawals are recorded in a separate account called the "drawings account". At the end of an accounting period, the balance in the drawings account is transferred to the capital account of the owner. This is because the withdrawals from the business reduce the owner's capital in the business, and transferring the balance in the drawings account to the capital account reflects this reduction. Therefore, the correct answer is (1) capital account. debit side of the trading account, credit side of the profit and loss account, current liabilities in the balance sheet, and current assets in the balance sheet are incorrect, as they do not reflect the correct accounting treatment for the drawings account of a sole proprietorship.