Balance sheet equation:

## The reasoning Think of **Assets** as everything valuable your business owns (cash, equipment, land). Now ask: *where did the money come from to buy all that?* Two sources only: 1. **Liabilities** — money you borrowed (loans, debts you owe suppliers) 2. **Equity** — money the owners put in, plus profits you've kept This is the **Accounting Equation**: **Assets = Liabilities + Equity** It's perfectly balanced because every naira in assets came from either borrowing or ownership. If you have ₦500,000 in assets, and you owe ₦200,000, then owners' equity must be ₦300,000. Always. ## Why the wrong options tempt you **B (Assets = Liabilities − Equity)** — You might subtract thinking "net worth," but that's just rearranging wrongly. Liabilities don't reduce by equity; they *add together* to form assets. **C (Equity = Assets + Liabilities)** — Mixing up the formula. If both assets AND liabilities increased equity, businesses would want more debt! **D (Assets = Revenue)** — Revenue is income over time; assets are what you *own*. Totally different concepts. ## Quick takeaway **Assets show *what you have*; Liabilities + Equity show *where it came from*** — always equal, always balanced.