If a company's assets are 106,219 and liabilities are 154,962, what is the capital?

If a company's assets are 106,219 and liabilities are 154,962, what is the capital?

• A. (48,743) Debit
• B. 48,743 Credit
• C. 106,219 Credit
• D. 154,962 Debit

Answer: (A)

To determine a company's capital, you can use the accounting equation, which states that Assets = Liabilities + Capital. Rearranging this equation to find capital gives us: Capital = Assets - Liabilities. In this scenario, the assets amount to 106,219 and the liabilities amount to 154,962. Substituting these values into the rearranged equation provides: Capital = 106,219 - 154,962 Capital = -48,743 This result indicates that the capital is negative, meaning the liabilities exceed the assets, signifying that the company has a capital deficit. When representing this situation in accounting, capital in a debit balance indicates a negative capital, which aligns with the first option provided. Thus, stating that the capital is (48,743) in a debit balance accurately reflects the company's financial position, indicating that the negative capital should be recorded as a debit.

To determine a company's capital, you can use the accounting equation, which states that Assets = Liabilities + Capital. Rearranging this equation to find capital gives us: Capital = Assets - Liabilities.

In this scenario, the assets amount to 106,219 and the liabilities amount to 154,962. Substituting these values into the rearranged equation provides:

Capital = 106,219 - 154,962

Capital = -48,743

This result indicates that the capital is negative, meaning the liabilities exceed the assets, signifying that the company has a capital deficit. When representing this situation in accounting, capital in a debit balance indicates a negative capital, which aligns with the first option provided.

Thus, stating that the capital is (48,743) in a debit balance accurately reflects the company's financial position, indicating that the negative capital should be recorded as a debit.