Which statement expresses the basic accounting equation?

Which statement expresses the basic accounting equation?

• A. Assets = Liabilities + Owner's Equity
• B. Revenues − Expenses = Net Income
• C. Cash + Accounts Receivable = Liabilities
• D. Owner's Equity = Assets − Liabilities

Answer: (A)

The basic accounting equation shows what a business owns (assets) and how those resources are funded (liabilities and owner’s equity). The standard expression is assets equal liabilities plus owner’s equity, meaning every asset is financed either by borrowing or by the owner's investment and retained earnings. This balance is the foundation of double-entry accounting: every transaction affects at least two accounts so the equation stays in balance. Therefore, stating that assets equal liabilities plus owner’s equity best captures that fundamental relationship. The other options describe different ideas—a focus on net income, a misfit with the balance of accounts, or a rearranged form that, while mathematically equivalent, isn’t the conventional presentation.

The basic accounting equation shows what a business owns (assets) and how those resources are funded (liabilities and owner’s equity). The standard expression is assets equal liabilities plus owner’s equity, meaning every asset is financed either by borrowing or by the owner's investment and retained earnings. This balance is the foundation of double-entry accounting: every transaction affects at least two accounts so the equation stays in balance. Therefore, stating that assets equal liabilities plus owner’s equity best captures that fundamental relationship. The other options describe different ideas—a focus on net income, a misfit with the balance of accounts, or a rearranged form that, while mathematically equivalent, isn’t the conventional presentation.