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This is because money coming into and going out of the business affects Owner's Equity.

Based on the debit and credit entries you have observed in this lesson, which of the following is true?


Expenses and Sales increase Owner's Equity
Expenses increase and Sales decrease Owner's Equity
Expenses decrease and Sales increase Owner's Equity
Expenses and Sales decrease Owner's Equity

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Tundexi

It is true that the expenses decrease and Sales increase the Owner's Equity.

Basically, owner's equity refers to the amount of the business-owner's investment in an asset after total liabilities have been deducted.

  • Any revenue into the business increase the owner's equity through business activities .

  • Any expense into the business decrease the owner's equity through business operations.

Therefore, the Option C is correct because the expenses decrease and Sales increase the Owner's Equity

Read more about Owner's Equity

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