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True or False: Equity on the balance sheet refers to what the owners receive after liabilities...

True or False: Equity on the balance sheet refers to what the owners receive after liabilities have been satisfied.

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Answer #1

Balance sheet represents the relationship between three components viz. assets, equity and liabilities as accounting equation which can be obtained as:

Assets = Liabilities + Shareholder’s equity or

Shareholder’s equity = Assets – Liabilities

Shareholder’s equity claims all the resources of a business after deducting all the liabilities and debts.

That’s why owner’s equity also known as the net asset which is the difference between total asset and total liabilities.

Hence the statement is true.

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