Which of the following describes the identity embodied in a balance sheet?
A) Net worth plus assets equal liabilities.
B) Assets plus liabilities equal net worth.
C) Assets equal liabilities plus net worth.
D) Assets plus reserves equal net worth.

Question

Quizplus · Accepted Answer

A balance sheet shows the financial position of a company at a particular point in time, where the assets of the company are equal to the liabilities plus the net worth of the company. This is because the funds used to purchase assets come from a combination of sources, either liabilities (borrowings) or equity (net worth). Therefore, the equation that best describes the identity embodied in a balance sheet is assets = liabilities + net worth.

Which of the Following Describes the Identity Embodied in a Balance