Question

When applying the general accounting equation, if total liabilities increased by $5,000, then (select the BEST and MOST COMPLETE answer) Group of answer choices stockholders' equity must have increased by $5,000. assets must have increased by $5,000, or stockholders' equity must have decreased by $5,000. assets and stockholders' equity each must have increased by $2,500. assets must have decreased by $5,000.

Answer 1

Answer:

Assets must have increased by $5,000, or stockholders' equity must have decreased by $5,000

Explanation:

The accounting equation shows the relationship between the elements of a balance sheet which are assets liabilities and equity.

This may be expressed mathematically as

Assets = Liabilities + Equity

As such, an increase in total liabilities by $5,000 from the options given means that assets must have increased by $5,000, or stockholders' equity must have decreased by $5,000, this way, the accounting equation stays true.