Which of the following equations is true for the balance sheet?

Assets = Liabilities + Capital

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Liabilities = Assets + Capital

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Capital = Assets + Liabilities

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All of these

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Solution

The correct option is A
Assets = Liabilities + Capital

Answer: (A) Assets = Liabilities + Capital
Explanation: The basic equation that is followed while preparing the balance sheet is Assets = Liabilities + Capital. As the balance sheet is prepared towards the end of each financial year, it clearly states the financial position of a business which needs to be communicated to the internal environments and external environments.

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Particulars	Note No.	31st March, 2019 (₹)	31st March, 2018 (₹)
I. EQUITY AND LIABILITIES 1. Shareholder's Funds
(a) Share Capital		3,50,000	3,00,000
2. Non-Current Liabilities
Long-term Borrowings		1,00,000	2,00,000
3. Current Liabilities :
Trade Payables		1,50,000	1,00,000
Total		6,00,000	6,00,000
II. ASSETS
1. Non-Current Assets
Fixed Assets (Tangible)		4,00,000	3,00,000
2. Current Assets
Trade Receivables		2,00,000	3,00,000
Total		6,00,000	6,00,000