Which of the following statements is TRUE?
A) Owner's withdrawals decrease net income.
B) Net income causes liabilities to decrease.
C) Net losses cause liabilities to increase.
D) Owner's withdrawals decrease owner's equity.

Question

Quizplus · Accepted Answer

Owner's withdrawals represent a decrease in the amount of funds the owner has in the business, which ultimately decreases owner's equity. Net income increases owner's equity and therefore does not cause liabilities to decrease. Net losses represent a decrease in owner's equity and do not necessarily cause liabilities to increase.

Which of the Following Statements Is TRUE