Final answer:
The traditional accounting equation is Assets = Liabilities + Net Worth, which ensures that a balance sheet is accurate by balancing total assets with the sum of liabilities and equity.
Step-by-step explanation:
The traditional accounting equation that verifies the accuracy of the entrepreneur's balance sheet is Assets = Liabilities + Net Worth. This equation reflects the two sides of a balance sheet: assets on one side and liabilities plus net worth (also known as equity) on the other. The T-account helps illustrate this by showing assets on the left side and liabilities and net worth on the right. In a T-account, net worth is calculated as total assets minus total liabilities and is included on the liabilities side to ensure the account balances.
For banks, assets include reserves, loans made, and securities like U.S. treasury bonds, while liabilities comprise deposits and other debts. A positive net worth indicates a healthy business, whereas a negative net worth suggests insolvency.The traditional accounting equation that verifies the accuracy of the entrepreneur's balance sheet is that assets are equal to liabilities plus owner's equity. This equation is represented by the T-account, which separates the assets on the left side and the liabilities and owner's equity on the right side. Net worth, or owner's equity, is included on the liabilities side of the equation to balance the T-account.