Question

1. Which of the following statements is incorrect? (A) Assets – Capital = Liabilities (B) Liabilities + Capital = Assets (C) Liabilities + Assets = Capital (D) Assets – Liabilities = Capital

Answer 1

Answer:

Option (c) is correct

Explanation:

According to the  Accounting Equation

                    Capital  = Assets – Liabilities

The value of liabilities can never be equal to the total of asses and capital.

Answer 2

The incorrect statement from the given options is option C:  Liabilities + Assets = Capital

• In the balance sheet, there should be a balance between assets and liabilities that contribute to the capital.

• Assets include the sum or total of liabilities and capital in the balance sheet. (Therefore option B is correct)
• According to this, it can be rearranged as follows:

1. Liabilities include capital deducted from assets that do not give any returns. (Therefore option A is correct)
2. Capital includes the subtraction of liabilities from assets. (Therefore option D is correct)

• Hence, Capital does not include the sum of liabilities and assets therefore it is incorrect.