Which term describes the decrease in equity from activity other than selling goods/services (e.g., selling a plant asset)?

Which term describes the decrease in equity from activity other than selling goods/services (e.g., selling a plant asset)?

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

Answer: (A)

A decrease in equity from activity other than selling goods or services is described as a loss. In accounting, revenues and gains increase equity, while expenses and losses reduce it. When you dispose of a plant asset and end up selling it for less than its book value, the resulting loss reduces retained earnings and thus decreases equity. Drawings also lower equity, but they are owner withdrawals, not a business transaction affecting the income statement, whereas the example given points to a loss from an asset disposal.

A decrease in equity from activity other than selling goods or services is described as a loss. In accounting, revenues and gains increase equity, while expenses and losses reduce it. When you dispose of a plant asset and end up selling it for less than its book value, the resulting loss reduces retained earnings and thus decreases equity. Drawings also lower equity, but they are owner withdrawals, not a business transaction affecting the income statement, whereas the example given points to a loss from an asset disposal.