Which statement below best describes the accounting equation?
A)The change in retained earnings equals net income less dividends.
B)Equality of revenue and expense transactions over time.
C)Resources of the company equal creditors' and owners' claims to those resources.

Question

Quizplus · Accepted Answer

The accounting equation follows the principle of resources equaling claims to those resources, meaning that the company's assets are equal to the creditors' and owners' claims to those assets. The equation is Assets = Liabilities + Equity. Option A describes the calculation of retained earnings, while option B describes the accrual accounting process of matching revenues and expenses over time.

Which Statement Below Best Describes the Accounting Equation