What formula represents the balance sheet?

The formula that represents the balance sheet is foundational to understanding the financial position of an entity at a specific point in time. It articulates the relationship between what the entity owns (assets), what it owes (liabilities), and the residual interest of the owners in the assets after deducting liabilities (owner's equity).

The balance sheet equation, Assets = Liabilities + Owner's Equity, indicates that all resources available to a business (assets) are financed either through borrowing (liabilities) or through investments from the owners (owner's equity). This equation must always hold true, ensuring that a company’s financial statements accurately reflect its investments versus its obligations.

Understanding this equation is crucial for an assisted living manager, as it provides insight into the fiscal health of the facility, which can impact operational decisions, staffing, and resident care. A balanced equation signifies that the financial records are in order, while any discrepancy may signal issues requiring further investigation.

The other formulas provided do not accurately represent the balance sheet relationship as established in accounting principles. They derive from rearranging the original equation but do not clearly communicate the essential concept that overall assets must equal the combined total of liabilities and owner's equity, which is the core principle for maintaining financial integrity.