Which Is a True Statement Regarding the Accounting Equation

question 173

Multiple Choice

Which is a true statement regarding the accounting equation?

• A)The equation can be stated as assets minus liabilities equals equity.
• B)The equation consists of three parts: assets,liabilities,and net income.
• C)The equation is an optional tool for accountants to use.
• D)The equation does not need to balance during a specific period.

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Definitions:

Revenues and Gains

Income generated from normal business operations and other positive financial events.

Cash Flows

The complete sum of funds flowing into and leaving a business, significantly impacting its liquidity.

Net Income

is the total earnings of a company after all expenses and taxes have been subtracted from total revenue; a key indicator of financial health.

Accrual Accounting

An accounting method where revenues and expenses are recorded when they are earned or incurred, regardless of when cash transactions occur.