Over a period of time, if total assets increase by $27,000 and total liabilities increase by $7,000, then owner's equity will be increased by $20,000
Equity in the context of finance refers to ownership of assets with potential obligations such as debts. For accounting reasons, equity is calculated by deducting liabilities from the value of the assets.
Owner's Equity is the portion of the total asset worth of a firm that its owners (sole proprietors or partnerships) and shareholders may claim (if it is a corporation). Equity is computed as the total value of an asset less all obligations (Equity = Assets - Liabilities).
Given that,
Total assets $27,000
Total liabilities $7,000
Equity = Assets - Liabilities
=$27,000-$7,000
=$20,000
Hence, Over a period of time, if total assets increase by $27,000 and total liabilities increase by $7,000, then owner's equity will be increased by $20,000.
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