Which of the following statements regarding the accounting equation is incorrect?
A) The equation is the basic tool of accounting.
B) The equation consists of three categories: assets, liabilities, and equity.
C) Each category of the accounting equation contains accounts.
D) The equation can be stated as assets plus liabilities equals equity.

Question

Quizplus · Accepted Answer

The correct form of the accounting equation is Assets = Liabilities + Equity, not assets plus liabilities equals equity. This equation shows that a company's assets are financed by debts (liabilities) and the owner's claims (equity).

Which of the Following Statements Regarding the Accounting Equation Is