Question

9. Complete the Accounting equation. CH 3 Assets - Liabilities = A. Net Worth B. Fund Balance C. Owner's Equity D. All of the Above

Answer 1

Answer : (d) all of the above

Above answers are explained below in detail:

The basic accounting equation is usually depicted as follows:

Assets = liabilities + capital

It is also called as balancesheet equation. It represents the relationship between the assets, liabilities and capital. It is based on double entry book keeping system. i.e., For each debit there is a corresponding credit. From the above equation we can draw different forms. They are as follows:

1.Assets - liabilities = capital

Capital here is termed as owners equity. Beacause liability portion in a balance sheet includes liabilities plus shareholders equity. Sum of these two will form the right side portion of the balalncesheet.

2. Assets - liabilities= net worth

Net worth is the excess of assets over liabilities which is also be termed as owners funds. Which includes equity, reserves etc.,

3. Assets - liabilities = fund balance

Fund balance means the excess of assets over liabilities also termed as net assets. Which is the balance used towards financing the firm's assets. Therefore it is called as fund balance.

Therefore from the above discussion we can easily conclude that assets - liabilities = capital/ net worth/ fund balance.

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