Question

Yr2 Yr 2 Yr 1 Accounts Cash Accounts recelvable Inventories 377 $141 Accounts payable 710 633 Notes payable 1,150 826 Accrued liabilities 136 $ 75 240 140 260 240 Total current liabilities 636 455 1,610 1,150 $2,246 $1,605 90 300 1,751 1,430 Total common equity$2,051 $1,730 Total liabilities and equity $4,387 $3.425 Total current assets $2,237 $1,600 Long-term debt Total liabilities Preferred stock Common stock Retained earnings 90 300 Net fixed assets $2,150 $1,825 $4,387 3,425 Total assets The focus in your finance course will not be on meticulous construction and classification of accounts and transactions. Rather, it will assume that the accountants who constructed the statements have done a good job, and you will be instructed how to interpret the statements Does the balance sheet shown above agree with or violate the fundamental accounting equation?
1. No, it violates the fundamental accounting equation.
2. Yes, it agrees with the fundamental accounting equation.

Answer 1

Answer:

2. Yes, it agrees with the fundamental accounting equation.

Explanation:

The Balance Sheet report the balance in Assets, Liabilities and Owners equity existing at the Reporting date. Preparation of the Balance Sheet is based on the Accounting Equation :

Assets = Liabilities + Owners Equity.

That means the Left Hand Side (Assets) must equal the Right Hand Side (Liabilities). This rule has been observed thus, Yes, it agrees with the fundamental accounting equation.