Based on the human life value approach, which of the following is NOT used to calculate the fundamental accounting equation?

• A. Liabilities
• B. Future earning potential of an individual
• C. Owner's Equity
• D. Assets

Answer: (B)

Verified step by step guidance

1. Understand the fundamental accounting equation: Assets = Liabilities + Owner's Equity. This equation is the foundation of financial accounting and represents the relationship between a company's resources (assets), obligations (liabilities), and ownership interest (owner's equity).
2. Recognize that the human life value approach is unrelated to the fundamental accounting equation. The human life value approach is used in insurance and financial planning to estimate the economic value of an individual's future earning potential, not for calculating accounting equations.
3. Identify the components of the fundamental accounting equation: Assets, Liabilities, and Owner's Equity. These are the only elements used in the equation, and they are derived from a company's financial statements.
4. Clarify that 'Future earning potential of an individual' is not a component of the fundamental accounting equation. It is a concept used in personal financial planning and does not appear in the calculation of Assets, Liabilities, or Owner's Equity.
5. Conclude that the correct answer to the question is 'Future earning potential of an individual,' as it is not relevant to the fundamental accounting equation.