Which of the following best represents the expanded accounting equation?

• A. Assets = Liabilities + Owner's Capital + Revenues - Expenses - Drawings
• B. Assets = Liabilities + Owner's Equity
• C. Assets + Liabilities = Owner's Equity + Revenues
• D. Assets = Liabilities - Owner's Capital + Expenses

Answer: (A)

Verified step by step guidance

1. Step 1: Begin by understanding the basic accounting equation, which is Assets = Liabilities + Owner's Equity. This equation forms the foundation of financial accounting.
2. Step 2: Expand the basic accounting equation to include the components of Owner's Equity. Owner's Equity is typically broken down into Owner's Capital, Revenues, Expenses, and Drawings.
3. Step 3: Recognize that Revenues increase Owner's Equity, while Expenses and Drawings decrease Owner's Equity. This leads to the expanded accounting equation: Assets = Liabilities + Owner's Capital + Revenues - Expenses - Drawings.
4. Step 4: Compare the given options to the expanded accounting equation. The correct representation should include all components of Owner's Equity (Capital, Revenues, Expenses, and Drawings).
5. Step 5: Eliminate incorrect options that do not align with the expanded accounting equation and select the correct one: Assets = Liabilities + Owner's Capital + Revenues - Expenses - Drawings.