Basic Accounting Equation Question

by Trina Brown
(Griffin, GA)

Before you begin: For purposes of exams and testing it's important to make sure you not only answer the questions correctly but are completing them at the right speed. Be sure to use a watch or clock to time yourself for this exercise.

Difficulty Rating:
Beginner

Time limit:
5 minutes

Question:

accounting equation Assets = Owner's Equity + Liabilities

Lynn Shackelford is the owner and operator of Galaxy LLC, a motivational consulting business.

At the end of its accounting period, December 31, 2023, Galaxy has assets of $823,000 and liabilities of $198,000.

Using the accounting equation, determine the following amounts:

Owner's equity, as of December 31, 2024, assuming that assets increased by $156,000 and liabilities increased by $48,000 during 2024.

Solution:

The accounting equation is:

ASSETS = LIABILITIES + OWNER’S EQUITY

So, for the year ended 2024:

Assets = $823,000 + $156,000 = $979,000 (1)
Liabilities = $198,000 + $48,000 = $246,000 (2)

Owner’s Equity = Assets - Liabilities
Owner’s Equity = $979,000 - $246,000
Owner’s Equity = $733,000

The Owner’s Equity as of December 31, 2024 is $733,000 (3)

accounting equation table fill in assets liabilities owners equity

That's it! Hope you enjoyed our basic accounting equation question.

If you have any questions or comments about this exercise or the solution, please have your say by adding a comment further below.

All the best in your studies!

Best,
Michael C.
Accounting-Basics-for-Students.com

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