Which two transactions increase owner's equity?

• A. Owner withdrawals and expenses
• B. Owner investment and revenues
• C. Wages expense and supplies
• D. Revenues and withdrawals

Answer: (B)

The amount of owner’s equity increases when the owner adds resources to the business or when the business earns income. An owner investment boosts contributed capital, directly raising equity. Revenues increase net income, and the resulting higher net income adds to retained earnings, which are part of owner’s equity. In contrast, expenses such as wages decrease net income and thus reduce equity, and withdrawals reduce the owner’s stake by taking money out of the business. Therefore, the two transactions that increase owner’s equity are owner investment and revenues.