If total liabilities increased by ¥35,000 and equity increased by ¥10,000 during a period of time, then total assets must change by what amount and direction during that same period?
A) ¥45,000 decrease
B) ¥45,000 increase
C) ¥60,000 increase
D) ¥70,000 increase

Question

Quizplus · Accepted Answer

The total change in liabilities and equity is ¥45,000 (¥35,000 increase in liabilities + ¥10,000 increase in equity). The accounting equation is Assets = Liabilities + Equity, so any change in liabilities and equity must be reflected in a corresponding change in assets. Therefore, total assets must also increase by ¥45,000.

If Total Liabilities Increased by ¥35,000 and Equity Increased by ¥10,000