Consulting Case Interview Practice Questions

Answer - C - In a corporation, if expenses exceed revenues in a given period and there are no gains or losses, stockholders’ equity will be decreased.

Key Takeaway: A loss by a corporation impacts stockholder equity and causes it to decrease. If the corporation recognizes a profit, that profit increases the stockholder’s equity. The decrease to the equity account is done by a debit entry, while the increase would be recognized with a credit entry.