Under which condition is owners' equity negative?
A) Credits exceed debits.
B) Assets are greater than liabilities.
C) Assets and liabilities are equal.
D) Debits exceed credits.
E) Liabilities are greater than assets.

Question

Quizplus · Accepted Answer

Owners' equity can be negative when liabilities are greater than assets, indicating that the business owes more than it owns. This may occur, for instance, if the company has incurred significant losses or if it has taken on significant debt without generating sufficient income or cash flow to cover it.

Under Which Condition Is Owners' Equity Negative