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Problem 1: Which of the following statements regarding the accounting equation is incorrect?
A) The equation is the basic tool of accounting.
B) The equation consists of three categories: assets, liabilities, and equity.
C) Each category of the accounting equation contains accounts.
D) The equation can be stated as assets plus liabilities equals equity.
Problem 2: Which of the following accounts increases with a credit?
A) Owner, Withdrawals
B) Owner, Capital
C) Accounts Receivable
D) Prepaid Expense
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