Capital = Liability - Assets

True

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False

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Solution

The correct option is B False
Given equation is fully wrong, correct equation is, $A s s e t s = C a p i t a l + L i a b i l i t y$ . To run a business one need to put in some resources, these are the assets that are applied in the business. The balance sheet of a business shows all the assets at a specified time and that equals to the capital and liabilities of a business.

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Similar questions

Q. If Capital =

70, 000

; Liability =

40, 000

Find Assets.

Q. Give one example of each of the following transactions:
(i) Increase in an asset and a liability.
(ii) Decrease in an asset and a liability.
(iii) Increase in assets and capital.
(iv) Decrease in assets and capital.

Give an example for each of the following types of transaction.
(i) Increase in one asset, decrease in another asset.
(ii) Increase in asset, increase in liability.
(iii) Increase in asset, increase in owner's capital.
(iv) Decrease in asset, decrease in liability.
(v) Decrease in asset, decrease in owner's capital.
(vi) Decrease in liabilities, increase in owner's capital.
(vii) Increase in one liability, decrease in another liability.
(viii) Increase in liabilities, decrease in owner's capital.

Q. The assets net of current liabilities is working capital.

Q. The accounting equation i.e. Assets = Capital + liabilities is based on _________________.

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