Explain the Accounting Equation, Also Called the Balance Sheet Equation

question 111

Essay

Explain the accounting equation, also called the balance sheet equation.

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Definitions:

Business Entities

Organizations that are formed to conduct business and engage in transactions, structured in various forms such as partnerships, corporations, and sole proprietorships, distinguished legally and financially from their owners.

Proprietorship

A type of business entity owned and operated by one individual, where there is no legal distinction between the owner and the business.

Contribution

The sum left over after variable expenses are subtracted from total revenue, which helps in covering fixed expenses and producing profit.

Stockholder

An individual or entity that owns shares in a corporation, giving them ownership interest.