Accounting: 2-1 The Accounting Equation

Front

What does the accounting equation represent?

Back

Assets, liabilities, and owners' equity

Front

What is an example of an asset?

Back

Equipment

Front

What is a liability in accounting?

Back

A debt or obligation owed to any other person or organization

Front

What is the relationship between assets, liabilities, and owners' equity?

Back

Assets = Liabilities + Owners' Equity

Front

What does the balance sheet equation highlight?

Back

The structure of the balance sheet

Front

What is the purpose of the accounting equation?

Back

To organize financial transactions into one simple equation

Front

What is the main function of owners' equity in the accounting equation?

Back

To represent the remaining assets of a company after all liabilities have been paid

Front

What is the accounting equation also known as?

Back

Balance sheet equation

Front

What is the purpose of a balance sheet?

Back

To show a company's financial situation at a moment in time

Front

What must always be true according to the balance sheet equation? Options: The sum of all assets and owners' equity must always be equal to its liabilities, The sum of all liabilities and owners' equity must always be equal to its assets, Liabilities must be greater than assets, Assets must be greater than liabilities

Back

The sum of all liabilities and owners' equity must always be equal to its assets