Questions: Multiple Select Question Select all that apply Which of the following statements explain(s) how the accounting equation applies to businesses? (Check all that apply.) The equation applies to all transactions and events. The equation states that Revenues - Expenses = Assets. The relation of assets, liabilities and equity is reflected in the equation. The equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners. The equation reflects the fact that, at any point in time, total revenues will always equal total liabilities and assets. The equation states that Assets = Liabilities + Equity.

The correct statements that explain how the accounting equation applies to businesses are:

1. The equation applies to all transactions and events.

   • This is correct because the accounting equation (Assets = Liabilities + Equity) is fundamental to all accounting transactions and events. It ensures that the balance sheet remains balanced after each transaction.

2. The relation of assets, liabilities, and equity is reflected in the equation.

   • This is correct because the accounting equation directly shows the relationship between a company's assets, liabilities, and equity. It is the foundation of the double-entry accounting system.

3. The equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners.

   • This is correct because the accounting equation ensures that the total assets (what the business owns) are always equal to the sum of liabilities and equity (what it owes to creditors and owners).

4. The equation states that Assets = Liabilities + Equity.

   • This is correct as it is the fundamental accounting equation itself, which is the basis for preparing the balance sheet.

Explanation for incorrect options:

2. The equation states that Revenues - Expenses = Assets.

   • This is incorrect because the equation Revenues - Expenses = Assets is not a valid representation of the accounting equation. Revenues and expenses affect equity, not directly assets.

3. The equation reflects the fact that, at any point in time, total revenues will always equal total liabilities and assets.

   • This is incorrect because total revenues do not equal total liabilities and assets. Revenues affect equity, and the accounting equation is Assets = Liabilities + Equity, not involving revenues directly.

In summary, the correct statements are 1, 3, 4, and 6.