If the liabilities of a business increased $75,000 during a period of time and the owner's equity in the business decreased $30,000 during the same period, the assets of the business must have:
A) Decreased $105,000.
B) Decreased $45,000.
C) Increased $30,000.
D) Increased $45,000.
E) Increased $105,000.

Question

Quizplus · Accepted Answer

The accounting equation is Assets = Liabilities + Owner's Equity. If liabilities increase by $75,000 and owner's equity decreases by $30,000, the assets must increase by $45,000 to balance the equation.

If the Liabilities of a Business Increased $75,000 During a Period