Which Of The Following Statements Is The Correct Definition Of Owner's Equity?

Which Of The Following Statements Is The Correct Definition Of Owner's Equity? A. Owner's equity is the cost of doing business during a period. B. Owner's equity addresses the rights of creditors against the assets of a business. C. Owner's equity is the owner's claim on a company's assets. D. Owner's equity includes the things of value owned by a business.
The correct choice of this multiple choice question is C, as Owner’s Equity shows the rights of owner of the business (Sole Proprietorship & Partnership) against the Assets of the business. It is proved with the help of Accounting Equation as shown below:

Assets = Liabilities  +  Owner’s Equity
 
Owner’s Equity = Assets - Liabilities

We get Owner’s equity after deducting all the liabilities (claims / rights of outsiders against assets) from assets.

A sole owner / proprietor is the person who invested into the business by assets such cash, equipment, property, goods, etc., to start the business to earn profits from profitable activities. Such initial investment (Capital) gives the business, assets in the form of cash or goods against which the proprietor has rights to claim from the business known as owner’s equity. The journal entry to record is to debit a cash, equipment and purchases account / inventory account (if cash, equipment and goods are invested) and a credit to owner’s capital account which represents owner’s equity in the business against assets of the business. During the accounting period, he may make additional investment into his business in order to stabilize and grow it. This additional investment made may be either due to increase in profits or he has cash or other assets and wants to invest further into the business.

The option A is incorrect choice here as it represents Expenses which are deducted from owner’s equity in the right side of accounting equation. Expenses are necessary to operate the daily business operations in order to earn revenues, which are added to Owner’s Equity in the right side of accounting equation, from these business operations.

The option B is also wrong as this statement is suitable for Liabilities.

The option D is wrong option here as it is the definition of Assets of the business.

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