Final answer:
Assets = Liabilities + Equity is the correct accounting equation. It indicates that a company's assets are always equal to the sum of its liabilities and equity. A bank's T-account will reflect this equation, with bank deposits being a key liability and bank reserves among assets.
Step-by-step explanation:
The correct version of the accounting equation is Assets = Liabilities + Equity, not Assets + Equity = Liabilities as you mentioned. This fundamental financial principle reflects the idea that everything the business owns (assets) is balanced against claims against the business, which are either claims by creditors (liabilities) or claims by owners (equity). In a T-account, the net worth or equity of a bank (or any business) is represented as total assets minus total liabilities. This equity is what the business would be left with after satisfying all liabilities, and it is included on the liabilities side to ensure that the T-account balances to zero.
Using a bank as an example, the assets would include holdings such as reserves, loans made to customers, and securities like U.S. treasury bonds. On the other hand, liabilities include deposits held by the bank which they owe to their depositors. For a healthy business, equity will have a positive value, implying that the business' assets exceed their liabilities. Conversely, for a bankrupt firm, equity may be negative, suggesting liabilities surpass assets.