Multiple choice

To which of the following accounts is the income tax paid by the sole-proprietor from business bank account debited?

  1. Income tax account

  2. Bank account

  3. Capital account

  4. Real account
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Income tax paid by a sole proprietor from the business bank account is treated as a personal expense, not a business expense. Therefore, it is debited to the Capital account (reducing the proprietor's capital). It is not debited to Income tax account (which is not maintained for sole proprietors), Bank account (which should be credited for the payment), or Real account (which is irrelevant here).

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