The expanded accounting equation under IFRS is as follows:a.Assets = Liabilities + Owner’s Capital + Owner’s Drawings + Revenues - Expenses.b.Assets + Liabilities = Owner’s Capital + Owner’s Drawings + Revenues - Expenses.c.Assets = Liabilities + Owner’s Capital - Owner’s Drawings + Revenues - Expenses.d.Assets = Liabilities + Owner’s Capital + Owner’s Drawings - Revenues - Expenses.
Question
The expanded accounting equation under IFRS is as follows:a.Assets = Liabilities + Owner’s Capital + Owner’s Drawings + Revenues - Expenses.b.Assets + Liabilities = Owner’s Capital + Owner’s Drawings + Revenues - Expenses.c.Assets = Liabilities + Owner’s Capital - Owner’s Drawings + Revenues - Expenses.d.Assets = Liabilities + Owner’s Capital + Owner’s Drawings - Revenues - Expenses.
Solution
The expanded accounting equation under IFRS is as follows:
a. Assets = Liabilities + Owner's Capital + Owner's Drawings + Revenues - Expenses. b. Assets + Liabilities = Owner's Capital + Owner's Drawings + Revenues - Expenses. c. Assets = Liabilities + Owner's Capital - Owner's Drawings + Revenues - Expenses. d. Assets = Liabilities + Owner's Capital + Owner's Drawings - Revenues - Expenses.
To determine the correct equation, we need to analyze each option step by step.
Option a: Assets = Liabilities + Owner's Capital + Owner's Drawings + Revenues - Expenses. This equation includes all the elements of the expanded accounting equation, including owner's drawings. Therefore, it is a valid representation.
Option b: Assets + Liabilities = Owner's Capital + Owner's Drawings + Revenues - Expenses. This equation combines assets and liabilities on one side and owner's capital, owner's drawings, revenues, and expenses on the other side. It does not include all the elements of the expanded accounting equation, so it is not correct.
Option c: Assets = Liabilities + Owner's Capital - Owner's Drawings + Revenues - Expenses. This equation includes all the elements of the expanded accounting equation, but it subtracts owner's drawings instead of adding them. Therefore, it is not a valid representation.
Option d: Assets = Liabilities + Owner's Capital + Owner's Drawings - Revenues - Expenses. This equation includes all the elements of the expanded accounting equation, but it subtracts both revenues and expenses instead of adding them. Therefore, it is not a valid representation.
Based on the analysis, the correct expanded accounting equation under IFRS is option a: Assets = Liabilities + Owner's Capital + Owner's Drawings + Revenues - Expenses.
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