Question

The accounting equation is represented by Assets= Liabilities + Stockholders' Equity. What could cause a change in the stockholders' equity accounts at the time of the transaction?

Answer 1

Changes in the stockholders' equity accounts can occur during various transactions such as investments, net income or net loss, and dividends.

Step-by-step explanation:

Changes in the stockholders' equity accounts can occur during various transactions. Some examples of transactions that could cause a change in stockholders' equity accounts include:

• Investments by the stockholders: When stockholders invest additional capital into the business, it increases the stockholders' equity accounts.
• Net income or net loss: If the business generates profits (net income), it increases the stockholders' equity accounts. Conversely, if the business incurs losses (net loss), it decreases the stockholders' equity accounts.
• Dividends to stockholders: When a business distributes dividends to its stockholders, it decreases the stockholders' equity accounts.