What is the formula for calculating assets based on liabilities and equity?

The correct formulation for calculating assets based on liabilities and equity is represented by the equation where assets equal the sum of equity and liabilities. This fundamental accounting principle is derived from the accounting equation, which states that assets are financed by liabilities and owner's equity.

In this context, when you add liabilities (the obligations a company owes) to equity (the owner’s claim after all liabilities have been settled), you arrive at the total asset value. This relationship emphasizes that all resources controlled by a business (assets) are sourced from outside parties (liabilities) and from the owners themselves (equity). Understanding this concept is crucial for managing financial statements and ensuring that a business remains solvent while providing care in an assisted living environment.