The accounting equation can be used to analyse transactions for a: Group of answer choices company. sole trader. not-for-profit entity. all of the above.
Question
The accounting equation can be used to analyse transactions for a:
- company.
- sole trader.
- not-for-profit entity.
- all of the above.
Solution
The accounting equation can be used to analyse transactions for all of the above.
Here's why:
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The accounting equation is Assets = Liabilities + Equity. This equation is a fundamental concept in accounting and forms the basis of the double-entry accounting system.
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This equation can be used to analyse transactions for any type of entity, whether it's a company, a sole trader (also known as a sole proprietor), or a not-for-profit entity.
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For a company or a sole trader, the equity part of the equation represents the owner's equity or the shareholders' equity. For a not-for-profit entity, the equity part of the equation represents the net assets of the entity, which is the difference between its assets and liabilities.
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Therefore, the accounting equation can be used to analyse transactions for any type of entity, making "all of the above" the correct answer.
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