Question

Gains and losses are increases or decreases in equity from which type(s) of transactions?

a) Incidental
b) Primary
c) Causal
d) Peripheral

Answer 1

Gains and losses in equity can arise from both incidental and primary transactions in a business context.

Step-by-step explanation:

Gains and losses in equity can arise from various types of transactions. These include both incidental and primary transactions. Incidental transactions are those that occur as a result of day-to-day operations, such as the sale of goods or services. On the other hand, primary transactions are major events that affect the financial position of a company, such as the issuance of new shares or the acquisition of another company.

For example, if a company sells a product for $100, the revenue from the sale would be recorded as a gain in equity. Similarly, if a company incurs a loss from an investment, it would result in a decrease in equity.

Therefore, gains and losses can arise from both incidental and primary transactions.