Final answer:
It is false that withdrawals are recorded as debits directly in the owner's capital account. They are recorded in the owner's drawing account, which is a contra equity account, and later affect the owner's capital account at the end of the period.
Step-by-step explanation:
In accounting practice, the capital account represents the owner's equity in a business, which is the value of the business assets minus its liabilities. When an owner withdraws assets for personal use, this is recorded as a decrease in the owner's equity. Therefore, withdrawals are recorded as debits to the owner's drawing account, which is a contra equity account, and not directly in the owner's capital account. Later on, the drawing account's balance will indeed decrease the owner's capital account when it's closed out at the end of the accounting period. As such, the statement is false. All firms utilize T-accounts to balance their assets against their liabilities and net worth. For example, in the T-account for a bank's balance sheet, assets, like loans made by the bank and U.S. Treasury Securities, are balanced against liabilities (e.g., customer deposits) and the net worth. However, withdrawals by the owner reduce the net worth of the business and are not directly entered into the capital account but go through the drawing account first.