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JAMB Principles of Accounts 1999 Question 6

Question 6

Accounting Concepts and Conventions

A basic unifying concept in accounting implies that

  1. A.where creditors' account is zero, the assets are equal to the owners' equity
  2. B.there should be a balance in the creditors' account in order to measure total assets
  3. C.revenues should be supported by invested and owners' capital
  4. D.total assets can be less than liabilities and equity.
Show the answer and explanation

Answer: A (where creditors' account is zero, the assets are equal to the owners' equity)

Explanation

Assets = liabilities + owners' equity, so with no liabilities, assets equal owners' equity.