##### Accounting

The balance sheet reports a company's assets, liabilities, and equity as of a specific date. This is different from an income statement, which covers a period of time.

The following example questions ask you to calculate a company's total liabilities and total equity on a given day.

## Practice questions

Use the following information to answer the questions. A company reports the following on its balance sheet:

• Cash: \$10,000

• Accounts receivable: \$20,000

• Inventory: \$14,000

• Prepaid expenses: \$3,000

• Property, plant, and equipment: \$35,000

• Accumulated depreciation: \$2,000

• Accounts payable: \$5,000

• Accrued expenses: \$6,000

• Short-term notes: \$7,000

• Long-term notes: \$10,000

• Capital stock: \$40,000

• Retained earnings: \$12,000

1. What are the company's total liabilities?

2. What is the company's total equity?

1. \$28,000

In the problem presented, total liabilities include accounts payable, accrued expenses, short-term notes, and long-term notes. To calculate the total liabilities, you need to add them up as follows: accounts payable of \$5,000 plus accrued expenses of \$6,000 plus short-term note of \$7,000 plus long-term notes of \$10,000 equals total liabilities of \$28,000.

2. \$52,000

In the problem presented, total equity includes capital stock and retained earnings. To calculate the total equity, you need to add them up as follows: capital stock of \$40,000 plus retained earnings of \$12,000 to give a total equity of \$52,000.

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