During 2020, Gibson company's assets decreased Tk. 50,000 and its liabilities decreased Tk. 90,000. Its equity therefore:
- A) increased Tk. 40,000
- B) decreased Tk. 140,000
- C) decreased Tk. 40,000
- D) increased Tk. 140,000
Show answer
Answer: A) increased Tk. 40,000
Explanation
Equity increased by Tk. 40,000. Use the accounting equation: Equity = Assets - Liabilities. The change in equity is the change in assets minus the change in liabilities: (-50,000) - (-90,000) = +40,000. Liabilities fell by more than assets, so the owners' claim grew.
Asked in: KGDCL 2021