Question

The statement of shareholders’ equity reports the transactions that cause changes in its shareholders’ equity account balances. It shows the beginning and ending balances in primary shareholders’ equity accounts and any changes that occur during the years reported.
1. Typical reasons for changes include each of the following except _________.
A) the sale of additional shares of stock.
B) the issuance of bonds.
C) net income.
D) declaration of dividends.

Answer 1

Answer:

B) the issuance of bonds.

Explanation:

Equity which represents the amount owed to the owners of the business includes retained earnings (which is the accumulation of the net income/loss over the years less dividends paid) and common shares.

As such, the sale of additional shares of stock, net income and declaration of dividend are typical reasons for changes in shareholder's equity however, the issuance of bonds is a liability (usually non-current).