On the balance sheet, stockholders' equity is
A) added to assets and the two are equal to liabilities
B) added to liabilities and the sum of the two are equal to assets
C) subtracted from liabilities and the net amount is equal to assets
D) subtracted from assets and the net amount is equal to net income

Question

Quizplus · Accepted Answer

Stockholders' equity represents the residual interest in the assets of the company after deducting its liabilities. Therefore, it is added to liabilities, and the sum of the two (liabilities and stockholders' equity) are equal to assets. This is the fundamental accounting equation (Assets = Liabilities + Stockholders' Equity) that underlies the balance sheet.

On the Balance Sheet, Stockholders' Equity Is