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The following statements about the accounting equation is true or false?
Business assets will always exceed business liabilities
Correct Answer in the book: FALSE
Doubt:
Asset = Capital + Liabilities ; this means “Business assets will always exceed business liabilities”. So, I think answer in the book is wrong.Please kindly explain sir.
Although the assets of a business will usually exceed the liabilities, it might not be the case.
If the business has made big losses then the capital would become negative and the liabilities would be less than the assets.
(If this carried on happening then the business would end up closing down, but it certainly can happen.)
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