Unit 6 Reading Activities Plus Questions

Read the following text and then complete the activities that follow.

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. The accounting equation should take intangible assets into consideration.
2. Goodwill and intellectual property are contingent liabilities.
3. Draws are part of the extended accounting equation.
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