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Answer:: 10. Bonus Question. Discuss The Accounting Equation

The accounting equation states that a company's total assets are equal to the sum of its liabilities and shareholders' equity. The equation captures the relationship between assets, liabilities, and equity on the balance sheet. Increases or decreases in assets and liabilities impact shareholders' equity inversely - increasing assets or reducing liabilities increases equity, while adding liabilities decreases equity.

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Elaine Joyce Garcia
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72 views1 page

Answer:: 10. Bonus Question. Discuss The Accounting Equation

The accounting equation states that a company's total assets are equal to the sum of its liabilities and shareholders' equity. The equation captures the relationship between assets, liabilities, and equity on the balance sheet. Increases or decreases in assets and liabilities impact shareholders' equity inversely - increasing assets or reducing liabilities increases equity, while adding liabilities decreases equity.

Uploaded by

Elaine Joyce Garcia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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10. Bonus Question. Discuss the accounting equation.

ANSWER:
The accounting equation states that a company's total assets are equal to the
sum of its liabilities and its shareholders' equity. The accounting equation A=
L+ OE; captures the relationship between the three components of a balance
sheet: assets, liabilities, and equity. All else being equal, a company’s equity will
increase when its assets increase, and vice-versa. Adding liabilities will decrease
equity while reducing liabilities—such as by paying off debt—will increase
equity. These basic concepts are essential to modern accounting methods.

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