If total liabilities decreased by $25,000 during a period of time and owner's equity increased by $30,000 during the same period, the amount and direction (increase or decrease) of the period's change in total assets is
To determine the amount and direction of the change in total assets, we need to understand the relationship between assets, liabilities, and owner's equity. The accounting equation states that:
Total Assets = Total Liabilities + Owner's Equity
Given the information provided, we know that liabilities decreased by $25,000 and owner's equity increased by $30,000.
To find the change in total assets, we can rearrange the accounting equation:
Change in Total Assets = Change in Total Liabilities + Change in Owner's Equity
Substituting the given values, we have:
Change in Total Assets = - $25,000 + $30,000
Change in Total Assets = $5,000
According to the given information, the change in total assets is $5,000. Since owner's equity increased and liabilities decreased, the change in total assets is an increase.