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Questions and Answers
Which of the following best defines the accounting equation?
Which of the following best defines the accounting equation?
- A statement of a company's financial position (correct)
- A report of a company's cash flow
- A mathematical formula used to calculate profit and loss
- A list of a company's expenses and revenues
What is the formula for the accounting equation?
What is the formula for the accounting equation?
- Liabilities = Assets - Equity
- Equity = Assets - Liabilities
- Assets = Liabilities - Equity
- Assets = Liabilities + Equity (correct)
Which of the following is an example of an asset in the accounting equation?
Which of the following is an example of an asset in the accounting equation?
- Interest income
- Salary expenses
- Accounts payable
- Accounts receivable (correct)
Flashcards
Accounting Equation
Accounting Equation
A fundamental principle in accounting stating that assets equal the sum of liabilities and equity.
Asset
Asset
A resource owned or controlled by a company that has economic value.
Accounting Equation Formula
Accounting Equation Formula
Assets = Liabilities + Equity
Study Notes
Accounting Equation
- The accounting equation is a fundamental concept in accounting that defines the relationship between a company's assets, liabilities, and equity.
- The formula for the accounting equation is: Assets = Liabilities + Equity.
- This equation is a balance sheet equation that suggests that the total value of a company's assets is equal to the total value of its liabilities and equity.
Assets
- Assets are resources owned or controlled by a business, such as cash, inventory, property, and equipment.
- Examples of assets include:
- Cash
- Inventory
- Property
- Equipment
- Investments
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