Question

Which of the following statements is fundamentally incorrect relating to the accounting equation?

1) Assets = Liabilities + Owner's Equity
2) The accounting equation is also known as the balance sheet equation
3) The accounting equation must always be in balance
4) The accounting equation is used to calculate net income

Answer 1

The accounting equation must always be in balance.

Step-by-step explanation:

The correct statement relating to the accounting equation is:

3) The accounting equation must always be in balance

The accounting equation, which states that Assets = Liabilities + Owner's Equity, must always be in balance. This means that the total value of assets must be equal to the sum of liabilities and owner's equity. If the equation is not balanced, there is an error in the recording or calculation of financial transactions.