In the equation Assets = ____ + ____, what fills the blanks?

Prepare for the Ontario PHBI Financial Planning and Management Test. Study with flashcards and multiple choice questions, each with hints and explanations. Ensure your success with adequate preparation!

The equation Assets = Liabilities + Owner's Equity is a fundamental principle of accounting known as the accounting equation. This equation reflects the relationship between a company's resources (assets) and the claims on those resources (liabilities and owner’s equity).

Assets represent everything a company owns that has value, such as cash, inventory, property, and equipment. Liabilities are obligations that the company owes to external parties, like loans and accounts payable. Owner's equity, on the other hand, represents the residual interest in the assets of the company after deducting liabilities; it is essentially the net worth of the business from the owner's perspective.

This equation holds true in a balance sheet context, where for every asset a company has, there is a corresponding source of financing, either through debts (liabilities) or shareholder contributions (owner's equity). This structure ensures that the balance sheet remains balanced, as the total value of assets must always equal the combined value of liabilities and owner’s equity.

The other options do not represent the correct relationship between assets, liabilities, and owner's equity. Revenue and expenses, for instance, relate more to performance metrics over a period rather than static financial position. Similarly, cash and receivables represent specific types of assets but do not encompass

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