Profits Increase / Losses Decrease Owner's Equity Account
Losses Decrease Owner's Equity Account Losses decrease Owner’s Equity Account as loss are deducted in the calculation of owner’s equity account. Owner’s Equity = Opening Capital + Additional Capital + Net Profit - Net Loss - Drawings For example, Assets = Rs. 20000, Liabilities = Rs. 10000, Owner’s Equity = Rs. 100000. The net loss of Rs. 50000 for the period is reported in Income Statement of a sole proprietor’s business, Mr. A, then in Accounting Equation , we get the following Assets = Liabilities + Owner’s Equity - Net Loss 20000 = 10000 + 600000 - 50000 ...