Assets minus Liabilities equals:

Question

BlackTom AI · Accepted Answer

When you see a prompt like 'Assets minus Liabilities equals:', you are being asked to recall the fundamental accounting equation in its rearranged form. 
Option 1: 'Profit' — This is not the result of subtracting liabilities from assets. Profit is a result of revenues minus expenses over a period and does not directly equal the difference between total assets and total liabilities on the balance sheet. 
Option 2: 'Owner's Equity' — This corresponds exactly to the equation: Assets minus Liabilities equals Owner's Equity. In double-entry accounting, the residual interest of the owners in the assets after subtracting liabilities is the owner’s equity. This is a standard interpretation of the accounting identity. 
Option 3: 'Remains' — This term is vague and does not map to a recognized financial category in the fundamental equation. It does not describe the computation Assets − Liabilities. 
Option 4: 'Debt' — Debt represents liabilities, not the difference between assets and liabilities. Subtracting liabilities from assets does not yield debt; debt is one side of the subtraction, not the residual outcome. 
Overall, the prompt tests understanding of the core relationship in accounting: what remains after liabilities are subtracted from assets, which is the owner’s claim on the business resources. The reasoning above distinguishes each distractor by its conceptual mismatch with the equation and clarifies why it does not fit the standard definition.

VPAB13H3 F LEC01 Final Exam Quiz

Assets minus Liabilities equals:

View Explanation

Log in for full answers

Similar Questions

Which of the following statements correctly summarize what a balance sheet is?

On a balance sheet, if the assets are $760,000 and the liabilities are $530,000, what is the owner's equity?

On a statement of financial position, I would expect to see the following equation:

If A = $100, L = $25, what does OE =?

Which of the following correctly states the balance sheet equation?

The balance sheet equation states:

The balance sheet equation states that assets = liabilities owners’ equity. Which of the following best describes the logic behind this equation?

How is equity typically calculated on a balance sheet?

More Practical Tools for International Students

Exam Browser Assistant

Stylized Writing Assistant

Plagiarism Checker Assistant

Citation Assistant

In-Class Translation Assistant

Class Notes Assistant

Quiz Search Assistant

Past Exam Questions by School

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler