Which of the following best describes liabilities and stockholders' equity?

Question

Quizplus · Accepted Answer

Liabilities and stockholders' equity represent the sources of financing for an entity's assets. Liabilities are obligations owed to creditors, while stockholders' equity represents the residual interest of the owners in the entity's assets after deducting liabilities. Both liabilities and stockholders' equity can increase when assets increase, but this is because the assets are being funded with more financing from creditors or stockholders. They are not reported on the income statement, which shows revenues, expenses, and net income.

Which of the Following Best Describes Liabilities and Stockholders' Equity