JAMB Accounts Principles of Accounts 2017 Paper

Concept:The accounting equation shows how the resources owned by a business are balanced against the claims on those resources.Explanation:A business uses its assets to generate value, and these assets are financed by two sources: outsiders (liabilities) and the owner (equity or capital).Therefore, the total value of assets must always equal the total claims against those assets.This relationship is written as:$$\text{Assets} = \text{Liabilities} + \text{Equity}$$By rearranging this equation, equity equals assets minus liabilities, while liabilities equal assets minus equity.Option B is wrong because net assets equal assets minus liabilities, which is equity alone.Options C and D rearrange the terms incorrectly.Only option A expresses the fundamental accounting equation correctly.Answer:A: $\text{Assets} = \text{Liabilities} + \text{Equity}$