Which of the following accounting equation is correct?
Correct answer: C. Assets-Liabilities=Capital
- A. Cash+Other assets=Capital-Liabilities
- B. Capital+ Liabilities=Assets+Income
- C. Assets-Liabilities=Capital
- D. Assets+Capital=Liabilities
Explanation
Rearranging the basic equation Assets = Liabilities + Capital gives Assets − Liabilities = Capital. The other equations either add unrelated items or place the elements on the wrong sides.
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About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
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