When a merchandising business is compared to a service business, the financial statement that is affected by that change is the Statement of Owner's Equity.

Question

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The Statement of Owner's Equity is affected by the change from a merchandising business to a service business because the owner's equity will be different in each type of business. In a merchandising business, the owner's equity will include the value of inventory, while in a service business, the owner's equity will not include the value of inventory.

When a Merchandising Business Is Compared to a Service Business