If the owner's equity account increases from the beginning of the year to the end of the year, the best explanation for this change is
A) profit is less than owner drawings.
B) a loss is less than owner drawings.
C) additional owner investments are less than a loss.
D) profit is greater than owner drawings.

Question

Quizplus · Accepted Answer

Owner's equity increases when the company earns a profit that is greater than the amount the owner withdraws from the business (owner drawings). Profits increase owner's equity, while drawings decrease it. If the profit exceeds the drawings, the net effect is an increase in owner's equity.

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