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Which of the following will cause total equity to increase?
APaying a cash dividend to shareholders
BA net loss for the period
CClosing expense accounts into Retained Earnings
DAdditional share investments by owners
Answer & Solution
Correct answer: D. Additional share investments by owners
1. Equity increases from additional share investments or from net income.
2. Additional share investments raise Share Capital, increasing total equity.
3. Dividends (A) and a net loss (B) decrease equity.
4. Closing expenses into Retained Earnings (D) reduces it.
5. Therefore additional share investments increase equity.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.8 "Changes in Stockholders' Equity", p.47_