Which term describes an increase in owner’s equity from selling goods/services?

Which term describes an increase in owner’s equity from selling goods/services?

• A. Revenue
• B. Gain
• C. Loss
• D. Drawing

Answer: (A)

Revenue represents the inflow from selling goods or providing services, and it increases the owner’s equity. When you make a sale, assets rise (cash or accounts receivable) and revenue is recorded, which boosts net income. That higher net income, in turn, increases retained earnings, a component of owner’s equity, so overall equity grows. This distinguishes it from other terms: a gain is an increase from non-operating activities, a loss reduces equity, and drawing reduces equity when the owner withdraws funds. In the context of regular business activity like selling goods or services, revenue is the term that describes the increase in owner’s equity.

Revenue represents the inflow from selling goods or providing services, and it increases the owner’s equity. When you make a sale, assets rise (cash or accounts receivable) and revenue is recorded, which boosts net income. That higher net income, in turn, increases retained earnings, a component of owner’s equity, so overall equity grows. This distinguishes it from other terms: a gain is an increase from non-operating activities, a loss reduces equity, and drawing reduces equity when the owner withdraws funds. In the context of regular business activity like selling goods or services, revenue is the term that describes the increase in owner’s equity.