Which of the statements below is TRUE? A. Accounting Identity is: Assets equivalentLiabilities minus Owners' Equity. B. Accounting Identity is: Assets equivalent Owners' Equity minusLiabilities. C. Accounting Identity is: Assets equivalentLiabilities + Owners' Equity. D. Accounting Identity is: Liabilities equivalentAssets + Owners' Equity.

Question

Esteban Schultz

Business

22 November, 20:30

Which of the statements below is TRUE? A. Accounting Identity is: Assets equivalentLiabilities minus Owners' Equity. B. Accounting Identity is: Assets equivalent Owners' Equity minusLiabilities. C. Accounting Identity is: Assets equivalentLiabilities + Owners' Equity. D. Accounting Identity is: Liabilities equivalentAssets + Owners' Equity.

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Answers (1)

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Josue Schneider · Answer 1

C. Accounting Identity is: Assets equivalentLiabilities + Owners' Equity.

Explanation:

In accounting identity all variables must balance, if they do not balance according to the equation then there must be an error in formulation, measurement or calculation.

The basic assumption in accounting identity is that the balance sheet must balance. That is assets must be equal to a sum of liabilities and owner's equity.

Asset = Liabilities + Owners Equity.

This relationship is based on the convention of double entry, for every debit there is an equal credit.