Question

The partial accounting equation of Assets = Liabilities + ? has been given below. Complete the accounting equation by dragging the items that affect equity into the expanded accounting equation in the order of Common Stock + Retained Earnings. Then, identify whether the item increases, '+', or decreases, '-'minus, equity.

Answer 1

Answer: Assets = Liabilities + Common Stock + Beginning Retained Earnings + Revenues - Expenses - Dividends

Explanation:

Equity is made up of the Common stock of common shareholders in the company. In addition to this there will be the beginning retained earnings which is an aggregate of the past retained earnings.

Income for the year will also be added to Equity and income is calculated by deducting expenses from revenues. Dividends are payments to the shareholders and because they are paid from retained earnings, they will be subtracted from equity.