Equity is increased by:
liabilities |
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dividends |
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revenues |
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expenses |
Net income=Revenue-Expenses
while
Addition to retained earnings=Net income-Dividends
Ending Equity=Beginning equity balance+Addition to retained earnings(Assuming other things are constant)
Hence higher the revenues;higher would be the net income and higher would be the retained earnings;and hence higher the equity balance.
On the other hand;higher the expenses paid lower would be the net income and lower the retained earnings and hence lower the equity balance.
Also;dividends would reduce the retained earnings and lower the equity balance.
Hence the correct option is Revenues.
NOTE:Liabilities do not form part of equity.
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