Which one of the following represents the expanded basic accounting equation? Group of answer choices Assets = Liabilities + Share Capital + Dividends – Revenue – Expenses Assets + Dividends + Expenses = Liabilities + Share Capital + Revenues Assets – Liabilities – Dividends = Share Capital + Revenues – Expenses Assets = Revenues + Expenses – Liabilities
Question
Which one of the following represents the expanded basic accounting equation? Group of answer choices
Assets = Liabilities + Share Capital + Dividends – Revenue – Expenses
Assets + Dividends + Expenses = Liabilities + Share Capital + Revenues
Assets – Liabilities – Dividends = Share Capital + Revenues – Expenses
Assets = Revenues + Expenses – Liabilities
Solution
The expanded basic accounting equation is represented by:
Assets + Dividends + Expenses = Liabilities + Share Capital + Revenues
Here's why:
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The basic accounting equation is Assets = Liabilities + Equity. This equation must always be in balance and is the foundation of the double-entry accounting system.
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In the expanded accounting equation, Equity is broken down into its components: Share Capital (or Owner's Capital), Revenues, and Expenses. Dividends are also added to the equation. Dividends are distributions of a company's earnings to its shareholders and are subtracted from Equity.
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Therefore, the expanded accounting equation becomes: Assets + Dividends + Expenses = Liabilities + Share Capital + Revenues.
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This equation shows that the company's assets, plus any dividends or expenses, are financed by liabilities, share capital, and any revenues the company earns.
Similar Questions
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Which one of the following accounting equations is correct?Group of answer choicesA. Cash + Other assets = Capital - LiabilitiesB. Capital + Liabilities = Assets + IncomeC. Assets – Liabilities = CapitalD. Assets+ Capital = Liabilities
As which one of the following can the accounting equation be rewritten as?Group of answer choicesA. Assets –liabilities – operating capital + drawings = operating profitsB. Assets - profit –drawings = closing capital – liabilitiesC. Assets + profits – drawings – liabilities = closing capitalD. Assets – liabilities – drawings = operating capital + profits
Which of these is not included as a separate item in the basic accounting equation?Group of answer choicesAssetsLiabilitiesExpensesOwner’s EquityStockholder’s Equity
Which of the following is the correct formula for the Accounting Equation?Assets = Liabilities – Shareholder’s EquityAssets = Liabilities + Shareholder’s EquityLiabilities = Assets + Shareholder’s EquityShareholder’s Equity = Assets + Liabilities
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