If total liabilities increased by $9000 during a period of time and owner's equity decreased by $25000 during the same period then the amount and direction (increase or decrease) of the period's change in total assets is a(n)
A) $34000 decrease.
B) $16000 decrease.
C) $16000 increase.
D) $34000 increase.

Question

Quizplus · Accepted Answer

The accounting equation states that Assets = Liabilities + Owner's Equity. If liabilities increase by $9000 and owner's equity decreases by $25000, the net change in assets is a decrease of $16000 ($9000 increase in liabilities minus $25000 decrease in owner's equity).

If Total Liabilities Increased by $9000 During a Period of Time