Question

Which of the following transactions causes a decrease in stockholders’ equity?

A. Paying advertising expense for the current month.

B. Repaying amount borrowed from the bank.

C. Providing services to customers for cash.

D. Providing services to customers on account.

Answer 1

Answer:

A. Paying advertising expense for the current month.

Explanation:

The decrease in stockholder equity would be affected when the adverting expenses are paid as this transaction decrease the cash balance of the current asset account plus the retained earning balance also decreases as the expense amount is deducted from the income earned

The other transactions which are given are not decreased the stockholder equity so it would not be effected at all.