Stockholders' Equity Is Decreased (Reduced) By All Of The Following Except What?

Stockholders' Equity Is Decreased By All Of The Following Except Sales Of Stock. Expenses. Net Losses. Dividends.

Why Does Revenue Increase Owner's Equity / Why Do Expenses Decrease Owner's Equity

Owner’s Equity / Stockholders’ Equity is decreased by Expenses, Net Losses and Dividends (Drawings Account in case of Sole Proprietorship or Partnership) but not by Sales of Stock (which is a Revenue) as sales of stock (additional capital introduced or additional investment made in case of Sole Proprietorship and Partnership) is an inflow of cash for the business which means that now the business / corporation has more cash to investment in the business, so ultimately equity increases.

On the other hand, Expenses decrease stockholders’ equity as there is an outflow of the cash for the business and now the business has less cash to invest in the business.

From Expanded Accounting Equation, we can see that revenues are added to equity while expenses are deducted from equity.

Assets  = Liabilities + Stockholders’ Equity + Revenues - Expenses - Dividends

Note: In case of Sole Proprietorship and Partnership, Owner’s Equity and Drawings are used in expanded accounting equation.

Owner's Equity Is Decreased / Reduced By All Of The Following Except?

Owner’s Equity is decreased by owner’s withdrawals, owner’s drawings, expenses, net losses but not by owner’s investment as it is the amount invested in the business to run and grow it. So it is an inflow of cash for the business and it surely increases owner’s equity. Owner’s equity is also increased by revenues.