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With regard to the accounting equation, state whether each of the following statements is true or false.
A. Business assets will always equal business liabilities True/False
B. Business assets will always exceed business liabilities True/False
C. Business assets include proprietor’s capital True/False
D. Business liabilities include proprietor’s capital True/FalseSource: Kaplan
* My question is why the second and the third statements are false.
The proprietors capital is a liability of the business (not an asset) – it is owed to the proprietor.
Given the the capital is a liability of the business, the assets of the business will always be equal to the liabilities.
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