The elements of a company's financial position are related by the accounting equation

Accounting Dec 16, 2020

The elements of a company's financial position are related by the accounting equation. The accounting equation is

a. Assets = Liabilities - Equity.

b. Assets = Liabilities + Equity.

c. Net Income = Revenue - Expenses.

d. Net Income = Revenue + Expenses.

Expert Solution

Answer : b. Assets = Liabilities + Equity.

Stated in the context above, the accounting equation is Assets = Liabilities + Equity. This equation must always be equal after all transactions are recorded or all journal entries are entered. Assets, liabilities and equity are the three components of a balance sheet or the statement of financial position.

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