What is the accounting equation?
AAssets = Liabilities + Equity
BAssets + Liabilities = Equity
CAssets = Liabilities − Equity
DRevenue = Liabilities + Equity
Answer & Solution
Correct answer: A. Assets = Liabilities + Equity
1. The accounting equation is the basis for all transactions and must always be in balance.
2. It states $\text{Assets} = \text{Liabilities} + \text{Equity}$.
3. Assets are funded by outsiders (liabilities) and owners (equity).
4. Options A and C misplace or misuse the terms; option D drops assets entirely.
5. Therefore Assets = Liabilities + Equity.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.7 "The Accounting Equation", p.41_
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