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If a sole trader has total assets of $50,000 and total liabilities of $30,000, w

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Question: If a sole trader has total assets of $50,000 and total liabilities of $30,000, what is the owner\'s equity?

Options:

  1. $20,000
  2. $30,000
  3. $50,000
  4. $80,000

Correct Answer: $20,000

Solution: 

Owner\'s equity is calculated as Total Assets minus Total Liabilities, which is $50,000 - $30,000 = $20,000.

If a sole trader has total assets of $50,000 and total liabilities of $30,000, w

Practice Questions

Q1
If a sole trader has total assets of $50,000 and total liabilities of $30,000, what is the owner's equity?
  1. $20,000
  2. $30,000
  3. $50,000
  4. $80,000

Questions & Step-by-Step Solutions

If a sole trader has total assets of $50,000 and total liabilities of $30,000, what is the owner's equity?
  • Step 1: Identify the total assets of the sole trader, which is $50,000.
  • Step 2: Identify the total liabilities of the sole trader, which is $30,000.
  • Step 3: Use the formula for owner's equity, which is Total Assets minus Total Liabilities.
  • Step 4: Substitute the values into the formula: $50,000 (Total Assets) - $30,000 (Total Liabilities).
  • Step 5: Calculate the result: $50,000 - $30,000 = $20,000.
  • Step 6: The owner's equity is $20,000.
  • Owner's Equity Calculation – Owner's equity represents the residual interest in the assets of the business after deducting liabilities, calculated as Total Assets minus Total Liabilities.
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