Question

analyzing financial statements reading quiz
question 8 of 10: the balance sheet reflects the accounting equation where:
a) assets = liabilities + equity.
b) assets + liabilities = equity.
c) assets + equity = liabilities.
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Explanation:

The basic accounting equation is Assets = Liabilities + Equity. This is a fundamental principle in accounting (a subfield of Business) where assets are the resources owned by a business, liabilities are the obligations, and equity is the residual interest in the assets after deducting liabilities. Option a) matches this equation. Option b) rearranges it incorrectly as Assets + Liabilities = Equity would not hold. Option c) is also incorrect as Assets + Equity = Liabilities does not follow the accounting equation.

Answer:

a) assets = liabilities + equity