Which formula correctly represents the accounting equation?

The accounting equation is a fundamental principle in accounting that illustrates the relationship between a company's assets, liabilities, and equity. Specifically, the correct representation of the accounting equation states that assets are equal to the sum of liabilities and equity. This reflects the concept that everything a company owns (its assets) is financed either by borrowing (liabilities) or through the owners' contributions (equity).

The correct formula, therefore, is that assets equal liabilities plus equity. This is essential in maintaining the balance in financial statements, as it ensures that a company’s resources are financed either through debt or its owners.

While the other options present variations of financial relationships, they do not correctly represent the accounting equation. For example, one option suggesting that assets plus liabilities equals equity is inaccurate, as it overlooks the dual aspects of funding assets—equity and liabilities. Another option incorporates revenue and expenses, which relates more to income statements rather than the balance sheet context of the accounting equation. The final choice incorrectly suggests that equity subtracts liabilities to ascertain assets, which misrepresents the foundational accounting equation.

In summary, the fundamental accounting equation stands as assets equaling liabilities plus equity, highlighting the financial position of a company and ensuring that its books remain balanced.