Which of the following statements explain(s) how the accounting equation applies to businesses? Check all that apply. A. The equ

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.