What is the fundamental equation of a balance sheet?

The fundamental equation of a balance sheet expresses the relationship between a company's assets, liabilities, and equity (also known as net worth). The correct formulation is that total assets equal the sum of total liabilities and equity. This encapsulates the accounting equation, which reflects the idea that everything that a company owns (assets) has been financed either through borrowing (liabilities) or through the owner's investment (equity).

So, when analyzing option D, it accurately states that total assets are equal to total liabilities plus net worth (or equity). This relationship is crucial in ensuring that a company's books are balanced, showcasing that for every financial transaction, there is a corresponding and equal effect on both sides of the equation.

In contrast, other options misrepresent this fundamental relationship. For instance, stating that total assets equal total liabilities alone overlooks the essential role of equity and does not make complete financial sense. Similarly, concepts like total liabilities minus assets or the other formulations do not capture the comprehensive view of how assets, liabilities, and equity interact in the financial structure of a business. Therefore, option D's representation aligns correctly with the principles of accounting and the essence of what a balance sheet conveys.