The statement 'Total Liabilities and Equity equals Assets' is:

The statement 'Total Liabilities and Equity equals Assets' is:

• A. False
• B. It depends on inflation
• C. True
• D. It is always greater than assets

Answer: (C)

In accounting, assets must be funded by liabilities and owners’ equity, so the balance sheet always balances. This is the accounting equation: Assets = Liabilities + Equity. Every asset is financed either by borrowing (liabilities) or by the owner's investment (equity), and double-entry bookkeeping ensures the total on both sides matches. Inflation doesn’t change this fundamental relationship—it only affects the measurement of amounts, not the equality. So the statement that total liabilities and equity equal assets is true.

In accounting, assets must be funded by liabilities and owners’ equity, so the balance sheet always balances. This is the accounting equation: Assets = Liabilities + Equity. Every asset is financed either by borrowing (liabilities) or by the owner's investment (equity), and double-entry bookkeeping ensures the total on both sides matches. Inflation doesn’t change this fundamental relationship—it only affects the measurement of amounts, not the equality. So the statement that total liabilities and equity equal assets is true.