Which of the following is the formula represented by the Golden Rule of the Balance Sheet?

• A. Assets = Liabilities + Cash
• B. Assets + Liabilities = Stockholders' Equity
• C. Assets = Liabilities + Stockholders' Equity
• D. Assets - Liabilities = Equity

Answer: (C)

The formula that encapsulates the Golden Rule of the Balance Sheet is represented by the equation Assets = Liabilities + Stockholders' Equity. This formula reveals the fundamental relationship between a company's assets, its obligations (liabilities), and the residual interest of its owners (stockholders' equity).

In essence, this equation asserts that everything a company owns (assets) is financed by borrowing (liabilities) or by the shareholders' investment (equity). This foundational concept highlights the core idea that a balance sheet must remain in balance; the total value of resources owned by the company must always equal the total claims against those resources.

Understanding this formula is crucial for analyzing a company's financial position, as it lays the groundwork for double-entry bookkeeping and ensures that the accounting equation maintains equilibrium at all times. Thus, the correct choice reflects the core essence of how a balance sheet is structured and the relationships between different financial components.