Which statement below best describes the accounting equation?
A)The change in retained earnings equals net income less dividends.
B)Equality of revenue and expense transactions over time.
C)Resources of the company equal creditors' and owners' claims to those resources.
D)Financing activities equal investing and operating activities.

Question

Quizplus · Accepted Answer

The accounting equation, also known as the balance sheet equation, represents the fundamental relationship between a company's assets, liabilities, and equity. It states that the resources or assets of a company must equal the creditors' and owners' claims to those resources or liabilities and equity. Option A describes the calculation of retained earnings, while option B describes the accrual accounting concept of matching expenses with revenues. Option D refers to the classification of cash flows in the statement of cash flows.

Which Statement Below Best Describes the Accounting Equation