Which equation expresses the fundamental accounting equation?

• A. Assets = Liabilities + Equity
• B. Liabilities = Assets + Equity
• C. Revenue = Expenses
• D. Cash = Revenue - Expenses

Answer: (A)

The main idea here is that what a company owns (assets) is financed either by what it owes (liabilities) or by the owner's claim (equity). In double-entry accounting, every asset must be matched by claims from creditors or owners, so the total assets always equal the sum of liabilities and equity. That's why the correct expression is Assets = Liabilities + Equity. The other options mix up different financial concepts: Revenue and Expenses relate to income and net income, not the balance of the balance sheet; Cash on its own cannot equal Revenue minus Expenses; and Liabilities cannot be set equal to Assets + Equity because that would improperly double-count resources.