The balance sheet equation is:
A) Total Assets - Total Current Liabilities = Net Worth.
B) Total Assets + Total Long-term Liabilities = Net Worth.
C) Total Assets - Total Liabilities = Net Worth.
D) Total Assets + Total Liabilities = Net Worth.
E) Total Liabilities - Total Current Assets = Net Worth.

Question

Quizplus · Accepted Answer

The balance sheet equation is based on the fundamental accounting principle of double-entry, which states that for every transaction, there must be an equal debit and credit. The equation states that Total Assets must equal the sum of Total Liabilities and Net Worth (also known as Shareholders' Equity or Owner's Equity). Therefore, the correct formula is Total Assets - Total Liabilities = Net Worth.

The Balance Sheet Equation Is