Which of the following is a true statement about the fundamental accounting equation as it relates to accounting for business activities?

• A. Owner's Equity = Assets - Revenues
• B. Assets = Liabilities + Owner's Equity
• C. Assets = Revenues - Expenses
• D. Liabilities = Assets + Owner's Equity

Answer: (B)

Verified step by step guidance

1. Step 1: Begin by understanding the fundamental accounting equation, which is the cornerstone of financial accounting. The equation is expressed as: Assets = Liabilities + Owner's Equity.
2. Step 2: Analyze each option provided in the problem to determine whether it aligns with the fundamental accounting equation. For example, 'Owner's Equity = Assets - Revenues' does not align because revenues are not part of the fundamental equation.
3. Step 3: Evaluate the second option, 'Assets = Liabilities + Owner's Equity.' This matches the fundamental accounting equation and is therefore correct.
4. Step 4: Review the third option, 'Assets = Revenues - Expenses.' This is incorrect because revenues and expenses are components of the income statement, not the balance sheet equation.
5. Step 5: Assess the fourth option, 'Liabilities = Assets + Owner's Equity.' This is incorrect because it reverses the fundamental accounting equation. Liabilities are not equal to the sum of assets and owner's equity.