When an owner invests assets in the business, the capital account increases.

• A. It increases revenues due to earning.
• B. It has no effect on capital.
• C. It increases expenses.
• D. It increases the capital account.

Answer: (D)

When an owner contributes assets, the business receives additional resources and the owner's stake in the company grows. This is reflected by an increase in the capital account, which is a component of owner's equity. In double-entry accounting, you would debit the asset being contributed (to record the increase in assets) and credit the capital account (to record the increase in the owner's equity tied to that contribution).

Revenues and expenses affect net income and are ultimately reflected in retained earnings and the overall equity, but they do not represent new owner contributions to the capital account itself. Saying there’s no effect on capital ignores the fundamental change in ownership equity when the owner puts assets into the business. And while expenses increase, they do not increase the capital account. Therefore, the investment specifically increases the capital account.