Decreases in Stockholders' Equity

Stockholders' equity decreases when the company causes expenses or when it accepts partial capital reductions.
Expenses. They are the expenses that originate the goods or services consumed by the company.
Partial Capital Reductions. They are the withdrawals in cash or in kind that the investor makes to reduce his own Capital, or those made by the partners to reduce the original investment of the Social Capital.
Decreases in Stockholders' Equity that originate both expenses and partial Capital reductions decrease Assets or increase Liabilities. Examples:
1. $ 20,000.00 was paid in cash for the electric power service.
- Asset in Cash... $ 20 000.00
- Capital for Expenses (electricity consumption |... 20 000.00
2. The telephone service, which amounted to $ 10,000.00, was left to owe.
+ Liabilities in various creditors... $ 10 000.00
- Capital for Expenses (use of the telephone service)... 10 000.00
3. The owner of the company decreased his Capital with a withdrawal of merchandise worth $ 40,000.00.
- Assets in Goods... $ 40 000.00

- Capital due to partial reduction... 40 000.00
Conclusions:
a) Stockholders' equity increases due to income and additional capital contributions.
b) Stockholders' equity decreases due to expenses and capital reductions.