Transactions between a company and its stockholders affect the company's _____ accounts only.

• A. expense
• B. liability
• C. equity
• D. revenue

Answer: (C)

Verified step by step guidance

1. Understand the nature of transactions between a company and its stockholders. These transactions typically involve ownership interests, such as issuing stock, paying dividends, or repurchasing shares.
2. Recognize that stockholder-related transactions do not directly affect the company's expense, liability, or revenue accounts. These accounts are tied to operational activities and obligations rather than ownership changes.
3. Identify that equity accounts are impacted by stockholder transactions. Equity represents the ownership interest in the company, including common stock, retained earnings, and additional paid-in capital.
4. Consider examples of equity transactions: issuing stock increases equity, paying dividends decreases retained earnings (a component of equity), and repurchasing shares reduces equity.
5. Conclude that transactions between a company and its stockholders exclusively affect the equity accounts, as these transactions are related to ownership and not operational or financial obligations.