Which term describes the value remaining in the business after all liabilities are subtracted?

Which term describes the value remaining in the business after all liabilities are subtracted?

• A. Equity
• B. Assets
• C. Revenue
• D. Liabilities

Answer: (A)

Equity is the value left for the owners after all debts are paid. It represents the owner’s claim on the business’s assets. In accounting terms, Assets = Liabilities + Equity, so Equity = Assets − Liabilities. For example, if a business has $120,000 in assets and $45,000 in liabilities, the equity is $75,000. This equity can change with net income, additional owner contributions, or withdrawals by the owner. Assets are the resources the business owns, not the remaining value after debts. Revenue is income that increases equity over time through net income, but it isn’t the residual value after liabilities. Liabilities are what the business owes, not what remains for the owners.

Equity is the value left for the owners after all debts are paid. It represents the owner’s claim on the business’s assets. In accounting terms, Assets = Liabilities + Equity, so Equity = Assets − Liabilities.

For example, if a business has $120,000 in assets and $45,000 in liabilities, the equity is $75,000. This equity can change with net income, additional owner contributions, or withdrawals by the owner.

Assets are the resources the business owns, not the remaining value after debts. Revenue is income that increases equity over time through net income, but it isn’t the residual value after liabilities. Liabilities are what the business owes, not what remains for the owners.