| LG | 3-7. | |
| Description of Equity Characteristic | Creditors’ Equity | Owner’s Equity |
| a. It always has the first claim on assets. |  |
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| b. It is increased by owner’s hard work and risk-taking. | |
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| c. It is usually called “liabilities.” | |
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| d. It is known as a “residual” claim on assets. | |
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| e. They are the debts of the business. | |
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f. It is increased when the owner invests in his/her business. |
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| g. It is created
when someone other than the owner provides assets or services to the business that are not immediately paid for. |
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| h. Together
they always add up to the total amount of assets. |
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Learning
Goal 3, continued
SOLUTIONS
| S2 |
Section
I - What Is a Business?
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