Which equation best represents the Balance Sheet?

The equation that best represents the Balance Sheet is indeed Assets = Liabilities + Shareholder's Equity. This fundamental accounting equation reflects the overall financial position of a business at a specific point in time.

In this equation, assets represent what the company owns, such as cash, inventory, and property. Liabilities account for what the company owes, including loans, accounts payable, and other financial obligations. Shareholder's equity signifies the residual interest in the assets of the company after deducting liabilities, essentially summarizing the net worth of the owners.

This equation is crucial because it establishes that all the resources of a business (assets) are financed either by borrowing (liabilities) or through contributions from owners (equity). It ensures that the balance sheet remains balanced, with every dollar of assets matched by a dollar of liabilities and equity.

The other statements, while relevant to financial concepts, do not accurately represent the balance sheet. For example, revenues and expenses pertain to the income statement, not the balance sheet, and cash flow relates to the cash flow statement. Understanding the distinction between these financial statements is essential for interpreting a company's financial health effectively.