Question

The totals of the two sides of the balance sheet must agree because of the ____________ equation.

• A. Assets $=$ Liabilities $-$ Capital
• B. Assets $=$ Liabilities $+$ Capital
• C. Assets $=$ Fixed Assets $+$ Core Assets
• D. All of the above

Answer 1

The correct option is B Assets $=$ Liabilities $+$ Capital

Accounting is based on the double entry system of accounting. For every debit there will be a credit, hence every business transaction affects two sides. On the same line, we can draw an accounting equation:

Assets= Liabilities

Fixed Assets+Current Assets=Owner's Equity+Liabilities

Fixed Assets+Current Assets= Capital+Reserves & Surplus+Long Term & Short term liabilities

Therefore

Assets=Liabilities+Capital