On a balance sheet, assets are equal to the sum of which of the following?

The correct answer reflects the foundational accounting equation which states that assets are equal to liabilities plus equity. In this case, equity is comprised of common stock, preferred stock, and retained earnings.

When constructing a balance sheet, all assets owned by a company are funded through either debt (liabilities) or through investments by shareholders (equity). Liabilities represent obligations to creditors, while equity represents the owners' claims after all liabilities have been settled.

Common stock and preferred stock are forms of equity that indicate ownership in the company, while retained earnings represent cumulative profits that have been reinvested in the business rather than distributed as dividends. Therefore, by including liabilities, common stock, preferred stock, and retained earnings in the equation, the answer accurately captures all the components that contribute to financing a company’s assets.

Other options do not encompass the complete structure of equity or incorrectly limit it to sections of the balance sheet. This makes the chosen answer the most comprehensive and accurate representation of how assets are financed within the balance sheet framework.