The accounting equation is
A) Assets = Liabilities - Shareholders' Equity.
B) Assets + Liabilities = Shareholders' Equity.
C) Assets = Liabilities + Shareholders' Equity.
D) Assets - Liabilities = Shareholders' Equity.

Question

Quizplus · Accepted Answer

The accounting equation is defined as Assets = Liabilities + Shareholders' Equity. This means that the total assets of a company must equal the total of its liabilities and shareholders' equity. Option A is incorrect because it subtracts shareholders' equity from liabilities, while option B adds assets and liabilities without considering shareholders' equity. Option D subtracts liabilities from assets, but does not consider shareholders' equity.

The Accounting Equation Is