How to figure out what direction assets changed based on the change in liabilities and stockholders equity?

Accounting Dec 16, 2020

Expert Solution

The accounting equation for the components of the balance sheet is as follows:

Total assets = total liabilities + stockholders' equity

It means that the change in the liabilities and the stockholders' equity has a direct impact on the change in the value of assets. If the net change in the liabilities and stockholders' equity is positive, it means that the assets have increased during the year. If the net change in the liabilities and stockholders' equity is negative, it means that the assets have decreased during the year.

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