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

Question

BlackTom AI · Accepted Answer

In this question, we’re asked to identify which statement correctly summarizes the balance sheet equation.
Option 1: 'Total Assets = Total Liability + Owner's Equity' This is the standard balance sheet equation, although many texts use 'Total Liabilities' (plural). The idea is that everything a company owns (assets) is financed either by what it owes (liabilities) or by the owners’ claims (owner's equity). The structure matches the fundamental formula.
Option 2: 'Total Liability = Total Assets + Debt' This reverses the relation and adds assets to liabilities, which would imply assets exceed liabilities by debt, creating an inconsistent and circular assertion. It conflicts with the double-entry principle where assets equal the sum of liabilities and equity, not a subset.
Option 3: 'Total Liability = Total Assets + Owner's Equity' This is also incorrect because it moves liabilities to equal assets plus equity, which ignores that assets are funded by both liabilities and equity in aggregate. It would exaggerate liabilities beyond the total of assets and equity, defying the basic accounting identity.
Option 4: 'Total Assets = Owner's Equity + Debt' This statement resembles the funding view but replaces the broader liabilities category with debt alone. It omits other liabilities (like accounts payable, taxes payable, etc.), thus misstates the full financing structure unless the business has no liabilities other than debt, which is rare. It oversimplifies the balance sheet relationship.
Overall, Option 1 correctly captures the fundamental accounting equation (assets equal liabilities plus owner’s equity), while Options 2, 3, and 4 introduce incorrect rearrangements or omissions of components. The key concept is that every asset must be financed by a claim from creditors (liabilities) and/or owners (owner's equity), with the totals balancing.

11:709:448:01 FOOD PROD MGMT FINAL Exam - F25- Dec 18- Requires Respondus LockDown Browser

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

查看解析

登录即可查看完整答案

类似问题

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 =?

Assets minus Liabilities equals:

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?

更多留学生实用工具

考试浏览器助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单