Multiple Choice
A financial manager's functions must be carried out while also balancing which of the following equations?
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1. Introduction to Accounting
Fundamental Accounting Equation
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following represents the expanded accounting equation?
A
Assets = Liabilities + Owner's Equity
B
Assets + Liabilities = Owner's Equity
C
Assets = Owner's Equity - Liabilities
D
Assets = Liabilities + Owner's Capital + Revenues - Expenses - Drawings
Verified step by step guidance1
Step 1: Begin by understanding the basic accounting equation, which is Assets = Liabilities + Owner's Equity. This equation forms the foundation of financial accounting.
Step 2: Expand the basic accounting equation to include additional components that affect Owner's Equity. These components are Revenues, Expenses, and Drawings.
Step 3: Recognize that Revenues increase Owner's Equity, while Expenses and Drawings decrease Owner's Equity. Incorporate these changes into the equation.
Step 4: Write the expanded accounting equation as: Assets = Liabilities + Owner's Capital + Revenues - Expenses - Drawings. This equation accounts for all changes in Owner's Equity.
Step 5: Use this expanded equation to analyze transactions and ensure the accounting records remain balanced, reflecting the true financial position of the business.
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