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WAEC Financial Accounting 2017 Question 2

Question 2

Accounting Equation

The claim on the assets of a business by outsiders is

  1. A.capital.
  2. B.liabilities.
  3. C.reserves.
  4. D.provisions.
Show the answer and explanation

Answer: B (liabilities.)

Explanation

Outsiders' claims (creditors, lenders) are liabilities; the owner's claim is capital.