According to the fundamental accounting equation, the sum of accounts with debit balances must equal the sum of accounts with credit balances. Which of the following best represents this equation?

• A. Assets = Liabilities - Equity
• B. Assets + Liabilities = Equity
• C. Assets = Liabilities + Equity
• D. Assets - Liabilities = Revenue

Answer: (C)

Verified step by step guidance

1. Understand the fundamental accounting equation, which states that the sum of accounts with debit balances (Assets) must equal the sum of accounts with credit balances (Liabilities and Equity). This ensures the accounting system remains balanced.
2. Recall the correct form of the fundamental accounting equation: \( \text{Assets} = \text{Liabilities} + \text{Equity} \). This equation represents the relationship between a company's resources (assets) and the claims against those resources (liabilities and equity).
3. Analyze the options provided in the problem. Compare each option to the correct form of the fundamental accounting equation to determine which one matches.
4. Option 1 (\( \text{Assets} = \text{Liabilities} - \text{Equity} \)) is incorrect because it does not balance the equation properly. Subtracting equity from liabilities does not represent the relationship accurately.
5. Option 3 (\( \text{Assets} = \text{Liabilities} + \text{Equity} \)) is correct because it aligns with the fundamental accounting equation, ensuring the balance between debit and credit accounts.