Question

We use the accounting equation to identify what a company owns and owes. _____ are resources a company owns or controls, _____ are claims creditors have against a company’s assets, and _____ is the owner’s claim on a company’s assets.

Answer 1

Answer:

We use the accounting equation to identify what a company owns and owes. Assets are resources a company owns or controls, Liabilities are claims creditors have against a company’s assets, and Equity is the owner’s claim on a company’s assets.

Explanation:

The accounting equation reads as Assets = Liabilities plus Equity.

The accounting equation forms the basis for preparing the balance sheet and the double-entry accounting system. When well prepared, the assets side should balance with liabilities and equity.