Double entry accounting requires that:
A) the claims held by external parties equal the claims held by the owners.
B) the total assets of an entity equal the total of the claims held by external parties plus those claims held by the owners.
C) the liabilities of the entity equal its total assets plus the claims held by the owners.
D) the recognition of the claims held by owners will match the entity's total assets.

Question

Quizplus · Accepted Answer

Double entry accounting requires that the total assets of an entity (debit) equal the total of the claims held by external parties (credit) plus those claims held by the owners (credit). This is known as the accounting equation: Assets = Liabilities + Owner's Equity. Therefore, option B is the correct answer. Option A is incorrect because it only refers to the claims held by external parties, and not the owners. Option C is incorrect because it reverses the order of the accounting equation. Option D is incorrect because it only refers to the recognition of claims held by owners, and not the total assets of the entity.

Double Entry Accounting Requires That