Which entry increases Owner's Equity?

Which entry increases Owner's Equity?

• A. Purchase of supplies
• B. Payment of cash
• C. Drawings
• D. Owner's Capital

Answer: (D)

When the owner contributes resources to the business, Owner's Equity increases. Recording the owner's capital work shows the owner’s claim growing: you debit the asset (like cash) and credit the Owner's Capital account, which increases equity. The other options don’t raise equity. Purchasing supplies swaps one asset for another and doesn’t change total equity. Paying cash for an expense or other use reduces cash and can reduce equity through lower net income in the long run. Drawings withdraw funds from the business and decrease Owner's Equity.

When the owner contributes resources to the business, Owner's Equity increases. Recording the owner's capital work shows the owner’s claim growing: you debit the asset (like cash) and credit the Owner's Capital account, which increases equity.

The other options don’t raise equity. Purchasing supplies swaps one asset for another and doesn’t change total equity. Paying cash for an expense or other use reduces cash and can reduce equity through lower net income in the long run. Drawings withdraw funds from the business and decrease Owner's Equity.