Expenses Calculation in Accounting
What are the expenses if assets are $225,000, opening equity is $100,000, liabilities are $60,000, and income is $145,000?
a. $80,000
b. $120,000
c. $15,000
d. $40,000
Answer:
The expenses are $80,000. Therefore, the correct option is a.
The relationship between assets, liabilities, and equity is given by the accounting equation:
Assets = Liabilities + Equity
Given the values provided:
Assets = $225,000
Opening Equity = $100,000
Liabilities = $60,000
We can rearrange the accounting equation to solve for equity:
Equity = Assets - Liabilities
Equity = $225,000 - $60,000
Equity = $165,000
Now, let's calculate the closing equity, which is the opening equity plus the income minus expenses:
Closing Equity = Opening Equity + Income - Expenses
Given:
Opening Equity = $100,000
Income = $145,000
Let's solve for expenses:
Expenses = Opening Equity + Income - Closing Equity
Expenses = $100,000 + $145,000 - $165,000
Expenses = $80,000
So, the correct answer is a. $80,000