According to the year-end balance sheet, what is the equity in the business?

According to the year-end balance sheet, what is the equity in the business?

• A. $17,000
• B. $11,000
• C. $6,000
• D. $23,000

Answer: (B)

Equity is the owners’ claim on the business after all debts are paid. On a balance sheet, assets must equal liabilities plus equity, so you find equity by subtracting total liabilities from total assets. The year-end totals in this scenario yield 11,000 as the remaining amount, which is the owners’ equity. This residual makes the equation balance: assets = liabilities + equity. The other numbers wouldn’t balance because they’d produce a different leftover after liabilities are covered.

Equity is the owners’ claim on the business after all debts are paid. On a balance sheet, assets must equal liabilities plus equity, so you find equity by subtracting total liabilities from total assets. The year-end totals in this scenario yield 11,000 as the remaining amount, which is the owners’ equity. This residual makes the equation balance: assets = liabilities + equity. The other numbers wouldn’t balance because they’d produce a different leftover after liabilities are covered.