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What is the accounting equation that underlies the preparation of final accounts
What is the accounting equation that underlies the preparation of final accounts?
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What is the accounting equation that underlies the preparation of final accounts?
Assets = Liabilities + Equity
Revenue = Expenses + Profit
Assets + Liabilities = Equity
Equity = Assets - Liabilities
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The accounting equation is Assets = Liabilities + Equity.
Questions & Step-by-step Solutions
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Q: What is the accounting equation that underlies the preparation of final accounts?
Solution:
The accounting equation is Assets = Liabilities + Equity.
Steps: 6
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Step 1: Understand that the accounting equation is a fundamental principle in accounting.
Step 2: Identify the three main components of the equation: Assets, Liabilities, and Equity.
Step 3: Recognize that 'Assets' are what the company owns.
Step 4: Understand that 'Liabilities' are what the company owes to others.
Step 5: Know that 'Equity' represents the owner's interest in the company.
Step 6: Put it all together to see that the equation is: Assets = Liabilities + Equity.
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