Which of the following equations is the balance sheet equation?

  1. Assets + Stockholders Equity = Liabilities.
  2. Assets + Liabilities = Stockholders’ Equity.
  3. Assets = Liabilities + Stockholders’ Equity.
  4. Assets = Liabilities + Common Stock.

Answer c. Assets = Liabilities + Stockholders’ Equity

Explanation: The fundamental accounting equation also called the balance sheet equation, addresses the connection between the liabilities, assets, and shareholder’s value of equity of an individual or business. It is the establishment of the double-entry accounting framework. For every exchange, the total debits are equal to the total credit.

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