Final answer:
The statement that the usual expression of the accounting equation is Assets = Liabilities + Owners' Equity is true. This fundamental accounting principle ensures that a company's assets are always equal to the sum of its liabilities and owner's equity, ensuring balance within a company's balance sheet.
Step-by-step explanation:
True or False: The usual expression of the accounting equation is Assets = Liabilities + Owners' Equity. This statement is true. The accounting equation represents a fundamental principle in financial accounting. In the equation, the assets of a company are always equal to the sum of its liabilities and owner's equity. Owner's equity, also referred to as shareholders' equity, is the amount of money that would be left if a company sold all of its assets and paid off all of its liabilities. This leftover money would belong to the owners or shareholders of the company. Therefore, on a balance sheet, the assets on one side must balance out with the combined total of liabilities and owner's equity on the other.
Consider a bank's T-account, which is a simplified representation of a bank's balance sheet. On a T-account, the assets of a bank, such as reserves, loans made, and U.S. treasury bonds, appear on the left side, while the liabilities, which include deposits and other borrowings, plus the net worth (or owner's equity), appear on the right side. The equation ensures that the T-account balances to zero: assets = liabilities + net worth. A healthy business will display a positive net worth, while a bankrupt firm will show a negative one.