A company’s balance sheet has total assets of $400,000 and total equity of $350,000. What are the total liabilities?

A company’s balance sheet has total assets of $400,000 and total equity of $350,000. What are the total liabilities?

A.$50,000

B.$350,000

C.$750,000

D.can not be determined

Answer: A.$50,000

This answer can be determined using the fundamental accounting equation: Basically, Assets equal Liabilities plus Equity or A = L + E. This equation holds the structure of the balance sheet wherein you guaranty that the total at the left side always equals the total on the right side. We are provided the total amount of assets ($400,000) and total equity ($350,000) totals in this case. So to get for total liabilities all that we have to do is reverse the formula and get Liabilities = Assets – Equity. Plugging in the numbers, we get: Liabilities = $ 400,000 – $ 350,000 = $ 50, 000. This computation shows the connection of the three key elements of a balance sheet. It is used widely in financial accounting to give a brief summary of the financial statements by showing what a company possesses, owes, and the(stockholders’) equity.