An important rule to remember when analyzing the impact of business transactions on accounts is:
A) net income increases stockholders' equity.
B) if expenses exceed revenues, the company will have a net income.
C) a net loss does not affect stockholders' equity.
D) stockholders' equity includes the two categories of income statement accounts, revenues and liabilities.

Question

Quizplus · Accepted Answer

Net income increases stockholders' equity because it represents the profits that are retained in the business, thus increasing the equity of the owners.

An Important Rule to Remember When Analyzing the Impact of Business