Which equation represents a Balance Sheet?

• A. Assets = Liabilities + Stockholders' Equity
• B. Revenues - Expenses = Net Income
• C. Cash Flow In - Cash Flow Out = Net Cash
• D. Equity = Liabilities - Assets

Answer: (A)

The main idea is the accounting equation that underpins the Balance Sheet: assets equal liabilities plus stockholders’ equity. This shows that everything the company owns (assets) is funded either by what it owes to others (liabilities) or by the owners’ claims (equity). The balance sheet is built so these amounts balance at a point in time.

The other options describe different financial concepts: revenues minus expenses equals net income comes from the income statement, not the balance sheet; cash inflows minus cash outflows equals net cash is a simplification related to cash flow statements; and equity equals liabilities minus assets would misstate how funding sources relate to assets.