[amp_mcq option1=”Assets = Liability + owner’s equity” option2=”The claim of outsiders against the business is the residual claim” option3=”Owner’s equity increases by loss” option4=”Increase in asset leads to increase in owner’s equity” correct=”option1″]<\/p>\n
The correct answer is A. Assets = Liability + owner’s equity.<\/p>\n
A balance sheet is a financial statement that reports a company’s assets, liabilities, and owner’s equity at a specific point in time. The equation Assets = Liability + owner’s equity is the fundamental accounting equation, and it must always be true.<\/p>\n
Assets are the resources that a company owns. Liabilities are the debts that a company owes. Owner’s equity is the difference between a company’s assets and its liabilities. It represents the amount of money that the owners of the company would receive if the company were to be sold.<\/p>\n
Option B is incorrect because the claim of outsiders against the business is the liability. Option C is incorrect because owner’s equity decreases by loss. Option D is incorrect because increase in asset does not always lead to increase in owner’s equity. For example, if a company buys a new asset with cash, its assets will increase but its owner’s equity will not change.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”Assets = Liability + owner’s equity” option2=”The claim of outsiders against the business is the residual claim” option3=”Owner’s equity increases by loss” option4=”Increase in asset leads to increase in owner’s equity” correct=”option1″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[85],"tags":[],"class_list":["post-48562","post","type-post","status-publish","format-standard","hentry","category-accounting","no-featured-image-padding"],"yoast_head":"\n