If owner's equity increases from the beginning of the year to the end of the year then
A) net income is less than owner drawings.
B) a net loss is less than owner drawings.
C) additional owner investments are less than net losses.
D) net income plus investments is greater than owner drawings.

Question

Quizplus · Accepted Answer

If owner's equity increases from the beginning of the year to the end of the year, then the company's assets must have increased by more than its liabilities over the same period. This can happen through a variety of means, including net income, additional owner investments, and a decrease in owner drawings. However, since we know that owner's equity increased, we can eliminate choices A and B (which both involve a decrease in owner's equity). Choice C is also not necessarily true, as additional owner investments could be greater than net losses and still result in an increase in owner's equity. Therefore, the best choice is D, which states that net income plus investments is greater than owner drawings.

If Owner's Equity Increases from the Beginning of the Year