If Assets Increased By $8,000 And The Total Liabilities Decreased By $2,000 During The Accounting Period, What Is The Change In The Owner's Equity Amount? | Multiple Choice Question

The correct answer of this multiple choice question (MCQ) is (C).

Explanation:

Here, Increase In Assets = $8000, Decrease In Total Liabilities = $2000

Find:

Change In Owner's Equity = ?

As we know that Accounting Equation shows the equality of total of Assets with the equality of total Liabilities plus Owner’s Equity. In equation form, we have:

                                             Assets      =        Liabilities     +      Owner’s Equity

                                            +$8000      =           -$2000        +      Owner’s Equity

Change / Increase In Owner’s Equity Amount    = +$8000 + $2000 = +$10000

When total assets increased and total liabilities decreased, then owner's equity also increased due to  the increase in total assets (positive impact for the business) and decrease in total liabilities (negative impact for the business) of the business 

So, the owner’s equity has increased by $10000 as compared to previous accounting period.