Which of the following statement of financial position equations is correct?
A)Assets - Liabilities = Shareholders' Equity
B)Assets + Liabilities = Shareholders' Equity
C)Assets - Current Liabilities = Long Term Liabilities
D)Assets + Current Liabilities = Long Term Liabilities + Shareholders' Equity
E)Assets + Current Liabilities = Long Term Liabilities - Shareholders' Equity

Question

Quizplus · Accepted Answer

The correct equation for the statement of financial position (also known as the balance sheet) is Assets - Liabilities = Shareholders' Equity. This equation represents the fundamental accounting equation, which states that the total assets of a company must equal the sum of its liabilities and shareholders' equity. Option B is incorrect because it adds liabilities to assets instead of subtracting, Option C is incorrect because it subtracts current liabilities from assets instead of subtracting all liabilities, and Options D and E are incorrect because they include different and incorrect combinations of the components.

Which of the Following Statement of Financial Position Equations Is