Equity Bookkeeping Question

by Sandra
(Louisiana)

Equity Question

Equity Question

At the beginning of the year, Precise Solution liabilities equal $59,000.

During the year, assets increased by $60,000, and at year-end assets equal $190,000.

Liabilities decreased $14,000 during the year.

What are the beginning and ending amounts of equity?

Comments for Equity Bookkeeping Question

Average Rating starstarstarstar

Click here to add your own comments

Aug 31, 2011
Rating
starstarstarstar 		Equity Question
by:

If at the beginning of the year, liabilities equal $59,000 and during the year, assets increased by $60,000, and at year-end assets equal $190,000 while Liabilities decreased $14,000 during the year, then I believe the beginning equity would be 71,000 and the ending equity would be 145,000. This is calculated as follows:

Assets = Liabilities + Owner's Equity

So at the beginning of the year the formula would be: 130,000 = 59,000 + 71,000

[assets = 130000 (190000-60000), liabilities = 59000 and equity = 71000 (130000 - 59000)]

While at the end of the year the formula would be: 190,000 = 45,000 + 145,000

[assets = 190000, liabilities = 45000 (59000 - 14000) and equity = 145000 (190000 - 45000)]

Click here to add your own comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Bookkeeping Questions and Answers.

Owner's Equity

Fundamental Accounting Equation

Fundamental Accounting Equation

Is it true that the equation assets minus liabilities equals owner's equity?

How does this equation represent the financial position of a business and the ownership stake of its owners?

Can you explain the relationship between assets, liabilities, and owner's equity in determining the net worth and value of a company?

Furthermore, how do changes in assets or liabilities affect owner's equity?

Comments for Owner's Equity

Average Rating starstarstarstarstar

Click here to add your own comments

Jul 17, 2023
Rating
starstarstarstarstar 		Fundamental Accounting Equation
by: Stephanie

Yes, the equation assets minus liabilities equals owner's equity. This equation represents the fundamental accounting principle of the balance sheet, which states that the total value of a company's assets must be equal to the sum of its liabilities and owner's equity.

Assets represent the resources owned by the business, such as cash, inventory, property, and equipment. Liabilities, on the other hand, are the obligations or debts that the company owes to creditors, such as loans or accounts payable.

Owner's equity, also known as shareholders' equity or net worth, represents the residual interest in the company's assets after deducting liabilities. It reflects the owner's or shareholders' investment in the business and any retained earnings or accumulated profits.

When assets exceed liabilities, the result is positive owner's equity, indicating that the business has a net worth. Conversely, if liabilities exceed assets, the owner's equity will be negative, indicating a net loss or deficit.

Changes in assets or liabilities directly impact owner's equity. For example, if the business acquires additional assets, such as purchasing new equipment, the owner's equity will increase. Conversely, if the company takes on more liabilities, such as borrowing funds or incurring debt, the owner's equity will decrease.

Understanding the relationship between assets, liabilities, and owner's equity is crucial for assessing the financial health of a business and determining its value. By analyzing these components, stakeholders can evaluate the company's solvency, profitability, and overall performance.

Click here to add your own comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Bookkeeping Questions and Answers.


Please subscribe to my monthly newsletter, Bookkeeping Basics E-zine. It tells you every month about the new information that I have added, including some great tips and advice from myself and other Bookkeeping Basics readers.

Enter Your E-mail Address
Enter Your First Name (optional)
Then

Don't worry — your e-mail address is totally secure.
I promise to use it only to send you Bookkeeping Basics E-Zine.

Like Bookkeeping-Basics.net?