What is the formula that defines the balance for a business (Assets minus Liabilities)?

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

Answer: (A)

The balance of a business is the owner’s equity—the residual claim after liabilities are paid. The fundamental accounting equation is Assets = Liabilities + Equity. If you solve for Equity, you subtract Liabilities from Assets: Equity = Assets - Liabilities. So the expression Assets minus Liabilities directly defines the balance (the equity) of the business.

Why the other options don’t fit: Liabilities plus Equity equals Assets, which is a rearranged form of the equation but not the balance itself. Adding Assets and Liabilities isn’t a standard balance relation. Equity minus Liabilities isn’t a recognized measure of the business’s balance.