Which equation represents the accounting equation used in the Statement of Financial Position?

The accounting equation represents the fundamental relationship between the resources a business owns (assets), the claims against those resources by creditors (liabilities), and the owners' claims (net assets or equity). The correct representation of this relationship is that the total assets of an organization are equal to the sum of its liabilities and net assets.

This equation reflects the principle that all assets must be financed either by borrowing money (liabilities) or by using the owners' funds (net assets). It is foundational in accounting and ensures that the balance sheet remains balanced, showing that what the company owns is financed by what it owes plus the equity of its owners.

The other options presented do not accurately convey this relationship. For example, while the second choice focuses on the relationship between revenues and expenses, it does not relate directly to the balance sheet's structure. Similarly, the other two options either rearrange components without correctly representing the foundational equation or misstate the relationships involved. Thus, the chosen equation is essential for understanding financial reporting and the position of a business at any point in time.