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WAEC Financial Accounting 2015 Question 14

Question 14

Accounting Equation

Which of the following expresses the accounting equation?

  1. A.Capital+assets = liabilities.
  2. B.Assets - liabilities = capital.
  3. C.Liabilities + Current Assets = Fixed Assets.
  4. D.Liabilities - Capital = Current Assets.
Show the answer and explanation

Answer: B (Assets - liabilities = capital.)

Explanation

What the business owns less what it owes to outsiders belongs to the owner: assets - liabilities = capital.