Fill in the Blank Questions:
Basic Accounting Equation and Changes to Owners Equity

by Sinthu

Q: The summaries of balance sheet and income statement data follow.

Beginning of year:
Total assets $ 85,000
Total liabilities 62,000
Total owner’s equity ?

End of year:
Total assets 110,000
Total liabilities ?
Total owner’s equity 60,000

Changes during year in owner’s equity:
Investments by owner ?
Drawings 18,000
Total revenues 175,000
Total expenses 140,000

Beginning of year:
If Assets = Owners Equity + Liabilities then
Owners Equity = Assets - Liabilities
= $85,000 - $62,000
= $23,000 Owners Equity

End of year:
If Assets = Owners Equity + Liabilities then
Liabilities = Assets - Owners Equity
= $110,000 - $60,000
= $50,000 Liabilities

Changes during year in owner’s equity:
For this final part of the question we need to reconstruct the statement of owners equity or basically how equity at the end of the year is calculated starting with equity at the beginning of the year plus/minus changes during the year.

Opening Balance $23,000
Investments by owner ?
Drawings -$18,000
Total revenues +$175,000
Total expenses -$140,000
Closing Balance $60,000

Let's put this in a formula:
Closing Balance = Opening Balance + Investments - Drawings + Revenues - Expenses
Switching that around we get:
Investments = Closing Balance - Opening Balance + Drawings - Revenues + Expenses
= $60,000 - $23,000 + $18,000 - $175,000 + $140,000
= $20,000 Investments

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