Question

A decrease in owner's equity may result from a(n)

1) Investment of cash in the business by the owner
2) Withdrawal of cash in the business by the owner
3) Purchase of office supplies for cash
4) Revenue that is derived from sales of goods or services

Answer 1

A decrease in owner's equity may result from a withdrawal of cash by the owner or a purchase of office supplies for cash.

Step-by-step explanation:

A decrease in owner's equity may result from a variety of activities. To address the given options specifically:

• An investment of cash in the business by the owner increases owner's equity, not decreases it.
• A withdrawal of cash in the business by the owner, also known as a draw, decreases owner's equity.
• Purchasing office supplies for cash represents an expense, and by reducing the company's assets without any associated revenue, it decreases owner's equity.
• Revenue derived from sales of goods or services increases owner's equity.

Therefore, the activities resulting in a decrease in owner's equity from the given choices are a withdrawal of cash by the owner and the purchase of office supplies for cash.