Question

Transactions affecting owner's equity include:

a. owner's investments, earning of revenues, incurrence of expenses, and collection of accounts receivable

b. owner's investments and payment of liabilities

c. owner's investments, owner's withdrawals, earning of revenues, and incurrence of expenses

d. owner's withdrawals, earning of revenues, incurrence of expenses, and purchase of supplies on account

Answer 1

• Owner’s Equity consists of:

---Owner’s capital or investment which increases the equity,
---Owner’s withdrawals, which decreases the equity,
---Net Income or Loss (which is the result of earning of revenues & incurrence of expenses), which increases or decreases the equity respectively.

• Therefore, the correct answer is Option ‘c’: Transactions affecting Owner’s Equity include “Ówner’s investments, Owner’s Withdrawals, earning of revenues & Incurrence of expenses”.