The Accounting Equation Must Remain in Balance

question 78

Multiple Choice

The accounting equation must remain in balance

• A) throughout each step in the accounting cycle.
• B) only when journal entries are recorded.
• C) only at the time the trial balance is prepared.
• D) only when formal financial statements are prepared.

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Definitions:

Objective Standard

A legal principle that evaluates the actions of individuals based on what a reasonable person would do under similar circumstances.

Contract

A legally enforceable agreement between two or more parties where each agrees to fulfill certain obligations in exchange for benefits or considerations.

Court

A governmental institution where legal disputes are resolved by judges or a jury, and laws are interpreted and applied.

Mirror-Image Rule

A principle which holds that the terms of an acceptance must mirror the terms of the offer. If the terms of the acceptance do not mirror the terms of the offer, no contract is formed and the attempted acceptance is a counteroffer.