The correct answer is Assets= Liabilities+ CapitalAccounting equation: The recording of business transactions in the books of account is based on a fundamental equation, which is called the Accounting Equation. Whatever business possesses in the form of assets is financed by the owner or by outsiders. The accounting equation expresses the equality of assets on the one side and equity on the other side, i. e. , the claims of an outsider [liabilities] and owners or proprietors of funds on the other side. If an asset is introduced in the business, a corresponding liability also emerges. It is represented as: Assets = EquityEquity = Liabilities + CapitalAssets= Liabilities+ CapitalEffects of business transaction on accounting equation: Sunil started the business with cash 3,00,000 as Capital. In this transaction, an asset in the form of cash is created for the business. Cash (Asset) Capital (Equity)3,00,000 = `3,00,000