In the accounting equation, assets are equal to which two things?

• A. Debits + equity
• B. Debits + accounts
• C. Liabilities + equity
• D .Liabilities + accounts

Correct Answer:

C. Liabilities + Equity

Explanation:

The accounting equation is the foundation of double-entry accounting:

Assets = Liabilities + Equity

1. Assets:
   Represent what a business owns (e.g., cash, equipment, inventory).
2. Liabilities:
   Represent what a business owes (e.g., loans, accounts payable).
3. Equity:
   Represents the owners’ interest or stake in the business (e.g., capital, retained earnings).

The equation ensures that every financial transaction is balanced, maintaining the integrity of financial records.