Asked by Tiffany McClendon on Jun 08, 2024
Verified
If total liabilities decreased by $30000 and owner's equity decreased by $15000 during a period of time then total assets must change by what amount and direction during that same period?
A) $45000 decrease
B) $15000 decrease
C) $15000 increase
D) $45000 increase
Total Liabilities
The sum of all monetary obligations a company owes to external parties, such as loans, accounts payable, and mortgages.
Owner's Equity
Represents the residual interest in the assets of a business after deducting liabilities, essentially the net worth belonging to the owners.
Total Assets
Represent the sum of all assets a company owns, including cash, inventory, property, and equipment, among others, showing the total value of what the company controls.
- Ascertain the influence that fluctuations in liabilities, assets, and owner's equity have on the cumulative financial condition of a company.
Verified Answer
TL
Timilehin LamoriuJun 09, 2024
Final Answer :
A
Explanation :
The accounting equation states that Assets = Liabilities + Owner's Equity. If liabilities decrease by $30,000 and owner's equity decreases by $15,000, the total decrease on the right side of the equation is $45,000. To keep the equation balanced, assets must also decrease by $45,000.
Learning Objectives
- Ascertain the influence that fluctuations in liabilities, assets, and owner's equity have on the cumulative financial condition of a company.