Which statement reflects the accounting equation?

The accounting equation is a fundamental principle in financial accounting that illustrates the relationship between a company's assets, liabilities, and stockholders' equity. This equation states that a company's assets are financed either by borrowing funds (liabilities) or by the investment of the owners (stockholders' equity).

The correct answer reflects this relationship accurately by stating that assets are equal to the sum of liabilities and stockholders' equity. This formula emphasizes that everything a company owns (its assets) is funded either through debts (what it owes) or through the capital invested by its owners. This balance is crucial for maintaining the integrity of financial statements and ensures that a company’s financial position is properly represented.

Other options do not accurately represent the accounting equation. For example, including revenues or expenses incorrectly implies that these figures are part of the fundamental balance between assets, liabilities, and stockholders' equity, which they are not in this context. Understanding this equation is essential as it lays the foundation for double-entry accounting, ensuring that all financial transactions are recorded in a way that maintains this balance.