Question

Which of the following will not cause a change in the owners' equity of a business?

1) Purchase of land with cash
2) Withdrawal of cash by the owner
3) Sale of land at a profit
4) Losses from unprofitable operations

Answer 1

The purchase of land with cash will not cause a change in the owners' equity as it's an asset exchange without impacting profitability or the overall value of the owner's stake in the business.

Step-by-step explanation:

The question asks which action will not cause a change in the owners' equity of a business. The options are:
1) Purchase of land with cash
2) Withdrawal of cash by the owner
3) Sale of land at a profit
4) Losses from unprofitable operations
Owners' equity is affected by the company's profits and losses, as well as the owner's contributions and withdrawals. Let's examine the options:

• The purchase of land with cash is an exchange of one asset (cash) for another (land), so it does not alter owners' equity.
• Withdrawal of cash by the owner (also known as drawing) reduces the owners' equity.
• The sale of land at a profit increases owners' equity due to the realized profit.
• Losses from unprofitable operations reduce owners' equity due to accumulated losses.

Therefore, the action that will not cause a change in the owners' equity is the purchase of land with cash.