If total assets decreased by $30,000 during a specific period and owner's equity decreased by $35,000 during the same period, the period's change in total liabilities was a $65,000 increase.

Question

Quizplus · Accepted Answer

This statement violates the accounting equation, which states that Assets = Liabilities + Owner's Equity. If Total Assets decreased by $30,000 and Owner's Equity decreased by $35,000, it means that the liabilities would have decreased by $5,000 (not increased by $65,000). The correct equation would be: Total Assets - Total Liabilities = Owner's Equity.

If Total Assets Decreased by $30,000 During a Specific Period