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The stockholder's equity is is reduced by revenues, expenses, and dividends... correct? First determine what is what! 1) Equity = credit 2) Revenues = credit 3) Expenses = debit 4) Dividends = debit Therefore Equity can only be reduced by debits which in your case are:- 3) Expenses and 4) Dividends. |
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Revenues increase equity. That's what companies are in business to do - earn revenues and increase equity. When they're earning, they're increasing worth, not decreasing. Even though it's good to learn revenue and expense separately, in reality you'll have these summarized on the income statement as net income. And then net income increased retained earnings. (Or net loss decreases.) |
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