Question

The basic balance sheet relationship is:

1) assets plus owner's equity equal liabilities.
2) assets equal liabilities plus owner's equity.
3) assets plus liabilities equal owner's equity.
4) assets equal owner's equity minus liabilities.

Answer 1

The basic balance sheet relationship in accounting is assets equal liabilities plus owner's equity.

Step-by-step explanation:

The basic balance sheet relationship in accounting is assets equal liabilities plus owner's equity.

A balance sheet is an accounting tool that lists the assets and liabilities of a business. Assets are things of value that a business owns, such as cash, inventory, or property. Liabilities are the debts or obligations that a business owes, such as loans or accounts payable. Owner's equity represents the owner's share of the business's assets after liabilities are deducted. So, the equation assets equal liabilities plus owner's equity is the fundamental relationship described on a balance sheet.