BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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expenses.
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additional investments by owners.
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withdrawals by the owner.
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purchases of merchandise.
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Detailed explanation-1: -How Owner’s Equity Gets Into and Out of a Business. The value of the owner’s equity is increased when the owner or owners (in the case of a partnership) increase the amount of their capital contribution. Also, higher profits through increased sales or decreased expenses increase the amount of owner’s equity.
Detailed explanation-2: -It increases with (a) increases in owner capital contributions, or (b) increases in profits of the business. The only way an owner’s equity/ownership can grow is by investing more money in the business, or by increasing profits through increased sales and decreased expenses.
Detailed explanation-3: -Owner’s equity is listed on a company’s balance sheet. Owner’s equity grows when an owner increases their investment or the company increases its profits.
Detailed explanation-4: -An issue of equity shares and retained earnings are the two important sources where owner’s funds can be obtained.
Detailed explanation-5: -If your business received cash as an additional investment from you or your business partners, that increases owners’ equity. Withdrawing some of your investment reduces equity.