Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 5

Which of the following is not a correct expression of the accounting equation?

a. Assets ? Liabilities = Owners’ equity

b. Net assets = Liabilities + Owners’ equity

c. Assets = Liabilities = Owners’ equity

d. Net assets = Owners’ equity

Step 1 of 5

Accounting Equation

It is an equation that represents the sum total of assets which is equal to the sum of liabilities and shareholder’s equity of the entity. The accounting equation is represented by the equation as shown below.

Balance Sheet

It can be defined as a statement that provides the summary of the Assets, Liabilities and the Owner’s equity in an organization on a particular date.  It contains all the closing balances of all the accounts that will be represented on the assets and liabilities side.

The balance sheet of any company shows asset on the debit side, liability and owner’s capital on credit side. Both debit and credit will be equal. Asset means all current and non-current assets to the company. Liability of the company shows short term liability and long-term liability. Owner’s capital shows all shares issued either preference or equity and reserve and surplus. This gives a whole description about the company’s financial health.