If total assets are $321,000 and total liabilities are $160,000, what is the owner's equity?

If total assets are $321,000 and total liabilities are $160,000, what is the owner's equity?

• A. $161,000
• B. $160,000
• C. $321,000
• D. $0

Answer: (A)

Owner's equity is what remains for the owner after all debts are accounted for. The fundamental relationship is Assets = Liabilities + Owner's Equity, so Owner's Equity = Assets − Liabilities. Here, assets are 321,000 and liabilities are 160,000, so 321,000 − 160,000 = 161,000. Therefore, owner’s equity is $161,000. The other amounts wouldn’t fit the given figures under the same accounting equation (for these numbers, equity must be 161,000; 160,000 would leave no remaining equity, 321,000 would imply no liabilities, etc.).

Owner's equity is what remains for the owner after all debts are accounted for. The fundamental relationship is Assets = Liabilities + Owner's Equity, so Owner's Equity = Assets − Liabilities.

Here, assets are 321,000 and liabilities are 160,000, so 321,000 − 160,000 = 161,000. Therefore, owner’s equity is $161,000.

The other amounts wouldn’t fit the given figures under the same accounting equation (for these numbers, equity must be 161,000; 160,000 would leave no remaining equity, 321,000 would imply no liabilities, etc.).