The accounting cycle? Help please?

Accounting Question: Accounting Equation. Please Help?

• Can someone please help with this accounting question? The answer is option A, I just don't understand why. I also know that the accounting equation is Assets = Liabilities + Stockholder's Equity. Please explain to me how they get their result. The three elements in the Balance Sheet: Assets, Liabilities, and Stockholders' Equity relate to each other through the basic accounting equation. If Stockholders' Equity is equal to Contributed Capital plus Retained Earnings, which of the following expressions of the basic accounting equation is correct? A) Contributed Capital = Assets - Liabilities - Retained Earnings. B) Retained Earnings + Assets = Liabilities + Contributed Capital. C) Assets = Liabilities - Contributed Capital + Retained Earnings. D) Liabilities = Contributed Capital + Assets - Retained Earnings.

• Answer:

  Assets = Liabilities + Stockholders' Equity Stockholders' Equity = Contributed Capital + Retained Earnings Therefore, by substitution: Assets = Liabilities + Contributed Capital + Retained Earnings If we subtract Liabilities and Retained Earnings from each side, we get: Assets - Liabilities - Retained Earnings = Contributed Capital, or, by symmetry Contributed Capital = Assets - Liabilities - Retained Earnings, or A Once you set the equations up, it's just basic algebra. I'm guessing that the fact that it's accounting and it's new to you is scaring you a bit.