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Question

The basis for the accounting equation is the principle of _________.

A
Rights
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B
Rules
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C
Procedures
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D
Policies
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Solution

The correct option is A Rights
Accounting equation is the foundation of double entry system of book-keeping. It displays that all the assets are either financed by borrowing money or paying from the shareholder's equity. The balance sheet being the complex version shows explain the equation very clearly and it shows that total assets is equal to total liability plus shareholder's equity. The basis for this equation is the principle of rights.

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