Final answer:
The accounting equation is accurately expressed as assets = liabilities + owner's equity. It is key to understanding the financial position of a business and is visually represented in a T-account.
Step-by-step explanation:
The accounting equation is expressed as assets = liabilities + owner's equity. This foundational accounting principle demonstrates that a company's total assets are financed by obligations to outsiders (liabilities) and the owner's claim on the remaining assets (owner's equity).
A T-account visually represents this equation for a firm, with assets on the left side and liabilities plus owner's equity on the right. The balance sheet of a bank, for instance, lists various types of assets and liabilities, where the net worth (bank capital) is considered as part of the liabilities side to make the T-account balance. For healthy businesses, net worth is positive, while for bankrupt firms, net worth will be negative.
Therefore, from the given options, the correct expression of the accounting equation would be (3) owner's equity = assets - liabilities.