The relationship between an entity's assets, liabilities, and owner's equity is represented by the basic accounting equation, often known as the balance sheet equation. It serves as the system's cornerstone for double-entry bookkeeping. The total debits and total credit for each transaction are equal.
Since Assets = liabilities +equity
Hence , change in assets = change in liabilities + change in equity
$100,000= change in liabilities +$200,000
-100,000= Change in liabilities-$200,000
change in liabilities =$100,000 increase
Amount of liabilities at Dec 31,2020
=$600,000 beginning +$100,000 increase
=$700,000
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