The obligations of the business to creditors are shown on the right side of the accounting equation.The right side of the accounting equation shows the sources of assets.
Which of the following statements are true
This statement is partially correct. The obligations of the business to creditors are indeed shown on the right side of the accounting equation, but the right side of the accounting equation typically shows the sources of funds or financing for assets, not necessarily just assets themselves.
The accounting equation is Assets = Liabilities + Equity. Assets are the economic resources that a business owns or controls, while liabilities are the obligations or debts that a business owes to others, such as creditors. Equity represents the residual interest in the assets of the business after deducting liabilities.
On the right side of the equation, liabilities are the primary source of financing for assets, as they represent the claims of creditors to the assets of the business. In this sense, the right side of the equation shows the sources of funds that have been used to acquire assets. However, the sources of funds may not always be restricted to just liabilities. Equity can also be a source of funds for assets, as it represents the contributions of owners or investors to the business.
In summary, while the statement is partly correct in that the obligations of the business to creditors are shown on the right side of the accounting equation, the right side of the equation typically shows the sources of funds or financing for assets, which may include both liabilities and equity.
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