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In the final accounts, how is the owner's equity calculated?

Practice Questions

Q1
In the final accounts, how is the owner's equity calculated?
  1. Assets - Liabilities
  2. Revenue - Expenses
  3. Net Income + Drawings
  4. Assets + Liabilities

Questions & Step-by-Step Solutions

In the final accounts, how is the owner's equity calculated?
  • Step 1: Identify the total assets of the business. This includes everything the business owns, like cash, inventory, and property.
  • Step 2: Identify the total liabilities of the business. This includes all debts and obligations the business owes, like loans and accounts payable.
  • Step 3: Subtract the total liabilities from the total assets. This calculation gives you the owner's equity.
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