Question

Jackson Electric Services Company incurred​ $800 as a repair expense and paid for it in cash. The company is a sole proprietorship. This transaction will​ ________. A. increase the assets of the business B. increase the liabilities of the business C. decrease the liabilities of the business D. decrease the​ owner's equity

Answer 1

Answer: Option D

Explanation: Owners equity refers to the amount of funds made available by the owners to operate the business activities. It includes initial capital invested and profits generated for the period

In the given case, the expense of $800 did not bring any assets or liabilities to the entity. Such an expense will be recorded in income statement leading to decrease in profits, thus, resulting in decrease in owners equity.