Question

oose the
Accounting equation signifies
(a) Capital of a business is equal to assets
b) Liabilities of a business are equal to assets
(c) Capital of a business is equal to liabilities
(d) Assets of a business are equal to the total of capital and liabilities
for his personal​

Answer 1

Answer:

What is the Accounting Equation?

The accounting equation is a basic principle of accounting and a fundamental element of the balance sheet. The equation is as follows:

Assets = Liabilities + Shareholder’s Equity

This equation sets the foundation of double-entry accounting and highlights the structure of the balance sheet. Double-entry accounting is a system where every transaction affects both sides of the accounting equation. For every change to an asset account, there must be an equal change to a related liability or shareholder’s equity account. It is important to keep the accounting equation in mind when performing journal entries.

The balance sheet is broken down into three major sections and their various underlying items: Assets, Liabilities, and Shareholder’s Equity.

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Accounting Equation Balance Sheet

Below are some examples of items that fall under each section:

Assets: Cash, Accounts Receivable, Inventory, Equipment

Liabilities: Accounts Payable, Short-term borrowings, Long-term Debt

Shareholder’s Equity: Share Capital, Retained Earnings

The accounting equation shows the relationship between these items.