In financial accounting, what fundamental balance sheet equation must always balance for every enterprise?
Answer and explanation
Correct answer: A. Assets equal liabilities plus equity
- Step 1: The fundamental accounting identity asserts that total assets (sredstva) must always equal the sum of liabilities (obveznosti do virov sredstev) and equity (kapital): . Answer: Assets equal liabilities plus equity. Why not the others: Revenues minus expenses equals profit (income statement), cash flow differs from net income, and assets do not equal income tax.
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