On April 1, Year 1, Ivy began operating a service proprietorship with an initial cash investment of $1,000. The proprietorship provided $3,200 of services in April and received full payment in May. The proprietorship incurred expenses of $1,500 in April, which were paid in June. During May, Ivy drew $500 against her capital account.
What was the proprietorship's income for the two months ended May 31, Year 1, under the following methods of accounting?
Cash-Basis Accrual-Basis a.
They said the answer is C. I thought that when there is a withdrawal, it is a reduction in the capital account of the owner so therefore it would be 1,200. Why isn't it subtracted?