Which of the Following Best Describes Why the Left and Right

question 64

Multiple Choice

Which of the following best describes why the left and right sides of a balance sheet are equal?

• A) In a properly run business, the value of liabilities will not exceed the assets held by the company.
• B) By definition, the assets plus the liabilities will be the same as the stockholders' equity.
• C) The assets must equal liabilities plus stockholders' equity because stockholders' equity is the difference between the assets and the liabilities.
• D) By accounting convention, the assets of a company must be equal to the liabilities of that company.

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Definitions:

Acquisition

Acquiring ownership of another firm through the purchase of its assets, shares, or both.

Fair Value

An approximate cost at which a transaction involving assets or liabilities might occur between informed and voluntary parties without any pressure.

Credit Balance

A situation in an account where the total credits exceed the total debits.

Consolidated Buildings

The combined value of all buildings and related facilities owned by a company as presented in its consolidated financial statements.