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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Write the fundamental accounting equation. Why is it significant?

To determine

Concept Introduction:

Accounting equation:

Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:

  Assets = Liabilities + Equity

To describe:

Fundamental accounting equation and its significance.

Explanation

Assets are the resources which are kept in the business for future benefits, for example; Land, equipment etc. Liabilities are the future obligation or amount payable for the business, for example: Accounts Payable, expenses payable, loan etc. Shareholder’s equity represents the amount of investment made by the owner in the business...

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