If the assets of a business increased $9,000 during a period of time and its liabilities increased $5,000 during the same period, equity in the business must have
A) Increased $14,000
B) Decreased $14,000
C) Increased $4,000
D) Decreased $4,00
E) Decreased $6,000.

Question

Quizplus · Accepted Answer

Equation for the balance sheet is: Assets = Liabilities + Equity
Since assets increased by $9,000 and liabilities increased by $5,000, we can assume that the remainder of the increase went towards equity. 
So, Equity = Assets - Liabilities
Equity = $9,000 - $5,000
Equity = $4,000
Therefore, equity in the business must have increased by $4,000.

If the Assets of a Business Increased $9,000 During a Period