PRC-1 · Chapter 1 · Question 15 of 100
During the accounting period, the assets of 'Pioneer Traders' increased by Rs. 7 million, while the owner's equity decreased by Rs. 3 million. Based on the accounting equation, what must have been the corresponding change in total liabilities?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Increased by 10 million
Explanation
The accounting equation is Assets = Liabilities + Equity. If Assets (+7) = Liabilities (X) + Equity (-3), solving for X means Liabilities must have increased by 10 million to balance the equation.
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