3-3 Analyze How Transactions Affect Equity Accounts

Which of the following accounts has a normal debit balance?

• Owners' Capital
• Expenses
• Liabilities
• Owners' Distributions

What is the normal balance for Owners' Equity accounts?

• Credit
• Debit
• Both
• Neither

Which of the following best describes the relationship between revenue and Owners' Equity?

• Revenue only affects liabilities
• Revenue increases Owners' Equity
• Revenue has no effect on Owners' Equity
• Revenue decreases Owners' Equity

If a company earns $5,000 in revenue, how does this transaction affect Owners' Equity?

• It decreases Owners' Equity
• It has no effect
• It increases Owners' Equity
• It only affects Assets

If a company has $10,000 in Owners' Equity and incurs $2,000 in expenses, what will be the new Owners' Equity?

• $2,000
• $10,000
• $8,000
• $12,000

What happens to Owners' Equity when a company incurs $500 in expenses?

• It increases by $500
• It decreases by $500
• It remains unchanged
• It increases by $1,000

Which of the following statements accurately describes the effect of expenses on Owners' Equity?

• Expenses have no effect on Owners' Equity
• Expenses only affect Assets
• Expenses increase Owners' Equity
• Expenses decrease Owners' Equity

What is the effect of crediting Owners' Equity?

• It increases Owners' Equity
• It only affects liabilities
• It has no effect
• It decreases Owners' Equity

How do Owners' Distributions affect Owners' Equity?

• They only affect Revenue
• They decrease Owners' Equity
• They have no effect
• They increase Owners' Equity

If an owner withdraws $1,000 from the business, what is the effect on Owners' Equity?

• It decreases Owners' Equity
• It increases Owners' Equity
• It only affects Assets
• It has no effect