The accounting equation is defined as:
A)Assets = Liabilities + Stockholders' Equity.
B)Assets = Liabilities - Stockholders' Equity.
C)Net Income = Revenues - Expenses.

Question

Quizplus · Accepted Answer

The accounting equation is Assets = Liabilities + Stockholders' Equity, meaning that the total assets of a company are equal to the sum of its liabilities and owner's equity. This equation is the foundation of double-entry bookkeeping, where every transaction must balance both sides of the equation. Option B is incorrect because subtracting equity from liabilities would not equal assets. Option C is also incorrect because it represents the equation for calculating net income, not the accounting equation.

The Accounting Equation Is Defined As