What is the basic accounting equation?

A. Capital + Liabilities = assets

B. Assets + Liabilities = Capital

C. Capital + Assets = Liabilities

D. Liabilities - Capital = Assets

Answer: Option A

Solution(By Examveda Team)

Capital + Liabilities = assets is the basic accounting equation. The fundamental accounting equation, also called the balance sheet equation, represents the relationship between the assets, liabilities, and owner's equity of a person or business. It is the foundation for the double-entry bookkeeping system.

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Comments ( 1 )

  1. Tolesa Debela
    Tolesa Debela :
    2 years ago

    Assets =Liabilities + Owner’s Equity.
    It is usual to place liabilities before the owner’s equity in the accounting equation because creditors have first rights to the assets.

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