Which of the Following Statements Regarding the Accounting Equation Is

question 117

Multiple Choice

Which of the following statements regarding the accounting equation is incorrect?

• A) The equation is the basic tool of accounting.
• B) The equation consists of three categories: assets, liabilities, and equity.
• C) Each category of the accounting equation contains accounts.
• D) The equation can be stated as assets plus liabilities equals equity.

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Definitions:

Net Plant

The total value of a company's property, plant, and equipment minus accumulated depreciation, representing the net book value of physical assets used in operations.

Operating Cycle

This refers to the period of time it takes for a business to purchase inventory, sell products, and receive cash from sales.

Sales on Account

Transactions in which goods or services are sold but payment is deferred, creating accounts receivable for the seller.

Cost of Goods Sold

Represents the direct costs attributable to the production of the goods sold by a company, including material, labor, and manufacturing overhead costs.