Question

if total liabilities increased by $5000 , then?

Answer 1

If total liabilities increased by $5000, then the asset must have incraesed by $5000 or stockholders equity must have decreased by $5000.

Total Assets - Total liabilities = Equity

Lets, assume  Asset = 10000 Liabilities = 5000 and Equity =5000

Total Assets - Total liabilities = Equity = 10000 - 5000 = 5000

Increase libilities by 5000, the chances are increase assets 5000 or deccrease equity 5000

15000 - 10000 = 5000 or 10000 - 10000 = 0

Increase in liabilities by $5000 will be affected expense increase in assets by same amount or any decrease in capital.