Which of the following is the common balance sheet layout?

A. assets = liability + owner’s equity
B. profit = revenue – total expenses
C. return on investment = net income 􏰁 owner’s equity D. gross profit margin = gross profit 􏰁 net sales

The common balance sheet layout is option A: assets = liability + owner's equity.

To understand why this is the correct answer, let's break it down:

A balance sheet provides a snapshot of a company's financial position at a specific point in time. It displays the company's assets (what it owns), liabilities (what it owes), and owner's equity (the owner's investment in the business).

In option A, it shows that the total assets of a company are equal to the sum of its liabilities and owner's equity. This equation represents the fundamental accounting principle of double-entry bookkeeping, where every transaction has an equal and opposite effect on the company's assets, liabilities, and owner's equity.

To determine whether this equation is correct, one can review a company's financial statements, specifically the balance sheet. The balance sheet will list the company's assets, liabilities, and owner's equity. By adding up the total assets and comparing it to the combined total of liabilities and owner's equity, one can verify if the equation holds true.

In summary, the common balance sheet layout is assets = liability + owner's equity, as it accurately represents the relationship between a company's assets, liabilities, and owner's equity.