Question

Total Liabilities + Owner’s Equity should equal Total Debt True False

  1. Total Liabilities + Owner’s Equity should equal Total Debt

    1. True

    2. False

Business   Accounting   
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Homework Answers

Answer #1

False.

We have an accounting equation that,

Assets = Liabilities + owners equity.

So from the above question it is understand that total assets must be equal to sum of total liabilities and owners equity. This equation is also known as fundamental accounting equation. Based on the double entry system, the accounting equation ensures that the balance sheet remains balanced and each of the entry made on the debit should have a corresponding entry on the credit side.

Hence, the given equation in the question is false.

SUMMARY:

The given question is that total debt equals to sum of liabilities and owners equity which is not true. The sum of liability and owners equity is equal to total assets and not total debt.

Hence, given statement is false.

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