Question

Which of the following statements about equity is most correct? O Equity represents the amount of cash available to the organization. O Equity is the residual claim against assets after all liabilities have been paid off. O Equity claims are paid before liability claims if a healthcare organization is liquidated O Equity must always be positive. ○ The balance of an organization's equity as of a given date is shown on the organization's income statement.

Answer 1

The Correct answer choice is “Equity is the residual claim against assets after all liabilities have been paid off”

-The Amount of Equity consists of the amount invested by the shareholders into the business and the cumulative balance of the net income made by the company after meeting all the expenses from the revenue earned by the company.

-According to the Fundamental Accounting Equation, the Assets = Liabilities + Equity, therefore, therefore, the Equity means the residual claim against assets after all liabilities have been paid off.

-Using the Fundamental Accounting Equation, The Equity = Assets - Liabilities