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Kaplan Kit Q. No. 42

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Kaplan Kit Q. No. 42

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.
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    Posts
  • June 12, 2021 at 2:29 am #624860
    ncell
    Participant
    • Topics: 27
    • Replies: 4
    • ☆

    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.

    June 12, 2021 at 7:36 am #624893
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    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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