The Correct Form of Accounting Equation Is (2024)

FAQs

The Correct Form of Accounting Equation Is? ›

The correct form of accounting equation is Assets – Liabilities = Equity. It can also be written as Assets = Liabilities + Equity.

The accounting equation states that a company's total assets are equal to the sum of its liabilities and its shareholders' equity.

Also known as the balance sheet equation, the accounting equation formula is Assets = Liabilities + Equity.

The Accounting equation is expressed as the Assets = Liabilities + Equity. This is a simple equation that is foundational to double-entry sort of accounting.

The accounting equation formula is: Assets = Liabilities + Owners' or Stockholders' Equity. This equation contains three of the five so called “accounting elements”—assets, liabilities, equity.

Accounting Equation is based on the Dual Aspect concept which states that each accounting transaction has two aspects, one is debit and another is credit. For every Debit, there shall be an equal and opposite Credit.

For a corporation the equation is Assets = Liabilities + Stockholders' Equity. For a nonprofit organization the accounting equation is Assets = Liabilities + Net Assets.

Answer and Explanation:

The correct answer is b) Assets = Liabilities - Owners' Equity. Assets should equal to liabilities plus owner's equity, not liabilities minus equity. Other equations are correct.

Assets = Liabilities + Stockholders' Equity. The basic accounting equation is assets equal liabilities and equity, but this can be derived as follows, which depends on what the missing amount is: Liabilities = Assets - Equity. Equity = Assets - Liabilities.