Which of the following best describes why the left and right sides of a balance sheet are equal?
A)By definition, the assets plus the liabilities will be the same as the shareholders' equity.
B)In a properly run business, the value of liabilities will not exceed the assets held by the company.
C)The assets must equal liabilities plus shareholders' equity, because shareholders' equity is the difference between the assets and the liabilities.
D)By accounting convention, the assets of a company must be equal to the liabilities of that company.

Question

Quizplus · Accepted Answer

This is because the balance sheet equation is Assets = Liabilities + Shareholders' equity. Therefore, the sum of the assets must always be equal to the sum of the liabilities and shareholders' equity. It is a fundamental accounting principle known as the accounting equation.

Which of the Following Best Describes Why the Left and Right