Do expenses increase owner's equity?
Understand the Problem
The question seems to revolve around the relationship between expenses and owner’s equity, likely challenging a common misconception. It is important to clarify that typically, expenses decrease owner’s equity as they reduce net income.
Answer
No, expenses decrease owner's equity.
No, expenses do not increase owner's equity; they decrease it.
Answer for screen readers
No, expenses do not increase owner's equity; they decrease it.
More Information
Owner's equity is impacted by various factors such as revenues, gains, expenses, and losses. While revenues and gains increase owner's equity, expenses and losses decrease it.
Tips
A common mistake is to assume that all financial activities that increase debit balances, like expenses, also increase equity. In fact, they reduce it.
Sources
- What is Owner's Equity? - Patriot Software - patriotsoftware.com
- Which of the following statements is not true? - Homework.study.com - homework.study.com
- Answer true or false: Expenses decrease equity - Homework.study.com - homework.study.com
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