Using the accounting equation During 2018, Flowing Rivers Spa reported revenue of $30,000. Total expenses for the year were $15,000. Rowing Rivers Spa ended the year with total assets of $43,000, and it owed debts totaling $14,000. At year-end 2017, the business reported total assets of $28,000 and total liabilities of $14,000. Requirements Compute Flowing Rivers Spa’s net income for 2018. Did Flowing Rivers Spa’s stockholders’ equity increase or decrease during 2018? By how much?

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A:

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Financial Transaction Analysis

The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business, at least two accounts should be affected I.e. both the debit side and the credit side should be equal. The Accounting Equation is