The version of the accounting equation that represents the entity theory of accounting is:

Question

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The entity theory of accounting emphasizes that the business organization is distinct from its owners or shareholders. Therefore, the accounting equation is Assets = Equities because the owner's equity is considered a part of the organization's capital. The equation shows that the assets owned by the business are equal to the claims held by the organization's creditors and owners.

The Version of the Accounting Equation That Represents the Entity