Which of the following transactions increases owner’s equity? a. Earn revenue b. Receive cash from customers on account c. Pay expenses d. Withdraw money for personal use

A. Earn revenue

B. Receive Cash from customers on account

Explanation:

The effects of the transactions mentioned in the question are explained below:

A. Earn Revenue

The revenue earned causes the owner's equity to increase. As will it increase the current assets (accounts receivable for credit based transaction and bank for cash based transactions).

B. Receive Cash from customers on account

When cash is received from customers it results in the increase in the current assets . Giving companies the opportunity to invest more in the business. Therefore, the owner's equity is increased in this case.

C. Pay expenses

When the expenses are paid, the owner's equity falls and simultaneously the current assets fall as the cash available has been decreased.

D. Withdraw money for personal use

The owner's equity when available is used for the purpose of investing in the business, therefore, when cash is withdrawn for personal use the amount available to spend on business has been reduced. Hence, owner's equity has fallen.

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