Answer:
A, E
Explanation:
The accounting equation indicates that the sum of a company's assets is equivalent to its equity plus liabilities, where assets refer to resources owned by the business. Equity comprises the resources owed to the owners, whereas liabilities represent the amounts owed to creditors (external parties). These components contribute to a company's balance sheet. For the balance sheet to maintain equilibrium:
Assets must equal the total of liabilities and equity. Therefore, option A is accurate, along with option E. Option B is incorrect since certain transactions recorded may affect both balance sheet elements and those from the P/L. For example, training expenses incurred by the company paid in cash involve both an asset and an expense. Option C, on the other hand, states that Revenue minus Expense equals profit, not assets. While the latter part of this option is correct, the earlier part is not. Finally, option D is also false for the same reasons as option C.
The statements are:
Dazzle, not being a distinct tax entity, means all owners report revenue from the company on their individual federal tax returns.
The $5 million villa is safeguarded from business debts unless those debts arise from wrongful conduct.
B is the correct response to that question.
