Unit 6 Reading Activity Plus Questions

Read the following text and then complete the activities that follow.
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The Accounting Equation

Financial accounting is an area which can be explained simply by using the accounting equation, which is assets = liabilities + capital.

But what does that really mean? To understand the significance of the equation, first we must explore the meaning of the three words; assets, liabilities and capital. These terms are often used in accounting but can have very different meanings.

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Quiz: Reading Questions

1. Incurring income statements cannot be quantified.
2. Goodwill and intellectual property are contingent liabilities.
3. Draws are part of the extended accounting equation.
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