Which of the following is an expression of the fundamental accounting equation?

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

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the fundamental accounting equation, which is the foundation of financial accounting. It states that Assets = Liabilities + Owner's Equity. This equation ensures that a company's financial position is balanced.
2. Step 2: Analyze the options provided in the problem. The first option, 'Revenues - Expenses = Net Income,' is related to the income statement and not the fundamental accounting equation. The second option, 'Assets + Liabilities = Owner's Equity,' is incorrect because it does not align with the fundamental accounting equation.
3. Step 3: Evaluate the third option, 'Owner's Equity = Assets - Revenues.' This is also incorrect because revenues are not part of the fundamental accounting equation. Revenues are part of the income statement and affect Owner's Equity indirectly through net income.
4. Step 4: Confirm that the correct expression of the fundamental accounting equation is 'Assets = Liabilities + Owner's Equity.' This equation reflects the balance between what a company owns (assets) and how those assets are financed (liabilities and owner's equity).
5. Step 5: Conclude that the correct answer is 'Assets = Liabilities + Owner's Equity,' as it accurately represents the fundamental accounting equation used in financial accounting.