PRC-1 · Chapter 1 · Question 90 of 100
Which of the following sets of accounting entries or actions will invariably result in a direct decrease in the owner's equity?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) The business paying routine operating expenses or the owner taking drawings.
Explanation
Expenses reduce the net profit, which in turn reduces equity. Distributions to the owner (drawings) also directly reduce the residual equity held by the proprietor.
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