If the owner's equity account increases from the beginning of the year to the end of the year, then
A) net income is less than owner drawings.
B) a net loss is less than owner drawings.
C) additional owner investments are less than net losses.
D) net income is greater than owner drawings.

Question

Quizplus · Accepted Answer

If the owner's equity account increases from the beginning of the year to the end of the year, it means that the assets of the business have increased more than any liabilities or withdrawals by the owner. This can only happen if the business has made a profit (net income) that is greater than any withdrawals by the owner (owner drawings). Therefore, the correct answer is D - net income is greater than owner drawings.

If the Owner's Equity Account Increases from the Beginning of the Year