If total liabilities decreased by $46,000 during a period of time and owner's equity increased by $60,000 during the same period, the amount and direction (increase or decrease) of the period's change in total assets is
A) $106,000 increase
B) $14,000 increase
C) $14,000 decrease
D) $106,000 decrease

Question

Quizplus · Accepted Answer

The accounting equation is Assets = Liabilities + Owner's Equity.

If liabilities decreased by $46,000 and owner's equity increased by $60,000, then the total change in the right-hand side of the equation is +$14,000 ($60,000 - $46,000 = $14,000).

Therefore, the total change in the left-hand side (total assets) must also be +$14,000.

The only answer choice that reflects this is B, where total assets increased by $14,000.

If Total Liabilities Decreased by $46,000 During a Period of Time