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Home > Accounting > Question

What is the Accounting Equation:

0
A) Assets = Equity - Liabilities
B) Equity = Assets + Expenses
C) Assets = Liabilities + Equity
D) Liabilities = Assets + Equity

Correct Answer: C) Assets = Liabilities + Equity

• The fundamental mathematical foundation of double-entry bookkeeping is Assets = Liabilities + Equity. • This specific universal equation directly governs the structural format of the Balance Sheet. • In this equation, whatever a business owns is always perfectly balanced by what it Owes. • The residual corporate interest after deducting all liabilities from assets is strictly called Equity. • For every recorded debit entry, there must always be an equal and corresponding Credit entry.

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