Your financial goals are the basis for measuring the progress of which of the following?

• A. Total liabilities only
• B. Owner's equity in the fundamental accounting equation
• C. Revenue recognition
• D. Depreciation expense

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 helps measure the financial position of a business.
2. Recognize that financial goals are typically tied to the growth or improvement of Owner's Equity, which represents the residual interest in the assets of the business after deducting liabilities.
3. Clarify that Owner's Equity is influenced by factors such as net income, investments by owners, and withdrawals or distributions. Progress toward financial goals can be measured by changes in Owner's Equity over time.
4. Differentiate Owner's Equity from other accounting elements like revenue recognition (which pertains to recording income when earned) and depreciation expense (which allocates the cost of tangible assets over their useful lives). These are important concepts but are not directly tied to measuring financial goals.
5. Conclude that the correct answer is Owner's Equity in the fundamental accounting equation, as it serves as the basis for measuring progress toward financial goals.