Which of the following equations represents the accounting equation?

The accounting equation is foundational to the field of accounting and represents the relationship between an entity's assets, liabilities, and equity. The correct equation, which is represented in the answer, states that assets equal liabilities plus equity. This means that what the company owns (assets) is funded by debts (liabilities) and the owners’ investment in the company (equity).

This relationship illustrates that every financial transaction affects at least two accounts in a way that keeps the equation balanced. For instance, when a company takes on debt to purchase equipment, both the asset (equipment) and the liability (debt) increase, keeping the equation in balance.

In contrast, the other equations do not accurately reflect the components and relationships outlined in the accounting equation. The first option incorrectly combines assets with expenses, which does not adhere to the principle of double-entry accounting. The third option wrongly suggests that income and expenses are part of the equation, rather than showing how they relate to equity. Lastly, the fourth option misplaces liabilities by suggesting they are equal to assets plus equity, which contradicts the core principle that assets are financed through liabilities and equity. Understanding this correct relationship is crucial for proper financial reporting and analysis.