Owner's Equity Impact from Sole Trader Transactions

Steps:

• Identify transactions affecting owner's equity: drawings reduce it, while non-equity items like asset purchases do not.
• Recall owner's equity formula: Assets - Liabilities = Owner's Equity.
• Analyze first transaction (e.g., owner's drawings): Directly decreases equity by reducing owner's capital.
• Analyze second transaction (e.g., purchase of supplies for cash): No effect on equity, as it swaps one asset for another.

Why A is correct:

• Drawings decrease equity per accounting definition (withdrawal of capital), while asset-for-asset exchanges maintain equity balance.

Why the others are wrong:

• B: Second transaction does not increase equity; no revenue or capital addition.
• C: Ignores drawings' direct reduction of equity.
• D: First transaction decreases equity, not neutral.

Not enough information on exact transactions to confirm, but A fits standard cases like drawings and asset purchase.

Final answer: A