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Balance Sheet Equation
What is the fundamental balance sheet equation?
Assets = Liabilities + Capital (Owner's Equity). This equation must always remain in balance after every financial transaction.
What is the accounting equation that forms the basis of double-entry bookkeeping?
Assets equal Liabilities plus Owner's Equity always.
What does the term 'Capital' represent in the balance sheet equation?
Capital represents the owner's equity or net worth, which is the residual interest in the assets of an entity after deducting all its liabilities.
How does the balance sheet equation change when a bank purchases fixed assets with cash?
Assets shift form; cash decreases, fixed assets increase equally.
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