Which of the following does the accounting equation state?
A) Revenue = Expense
B) Assets = Liabilities + Owners' Equity
C) Liabilities = Owners' Equity
D) Net income = Long-term Liabilities

Question

Quizplus · Accepted Answer

The accounting equation states that Assets are equal to the sum of Liabilities and Owners' Equity. This relationship must always hold true in order to ensure that the financial statements are accurate and reliable. Option A is incorrect as revenue and expense are part of the income statement, not the accounting equation. Option C is incorrect as liabilities and owners' equity are two separate items in the equation. Option D is incorrect as net income and long-term liabilities are two separate items in financial statements.

Which of the Following Does the Accounting Equation State