Question

Select the most appropriate alternatives from those given below

External Liabilities plus capital is __________.
a) Net work
b) Assets
c) Net Profit
d) Gross Profit

Answer 1

External liabilities plus capital is Assets.

Explanation:
The sum of external liabilities and capital (that includes owner’s own funds) equals total assets of a firm.

Algebraically:

Capital- It is the amount of own funds invested by a proprietor in his/her business. The amount of capital excludes all borrowed amounts and loans.
Liabilities or External Liabilities- These include all what a firm owes. That is, all the payment obligations of a firm.
Assets- These comprises all what a firm posses (whether tangible and/or intangible).

Hence, the equation (1) always holds true.