The income statement of a proprietorship for the month of February indicates a net income of $17,500

The income statement of a proprietorship for the month of February indicates a net income of $17,500. During the same period, the owner withdrew $25,500 in cash from the business for personal use.

Would it be correct to say that the business incurred a net loss of $8,000 during the month? Discuss.

Answer:
No. It would be incorrect to say that the business had incurred a net loss of $8,000. The excess of the withdrawals over the net income for the period is a decrease in the amount of owner’s equity in the business.