On a balance sheet, what must balance?

A balance sheet is a financial statement that provides a snapshot of an entity's financial position at a specific point in time. It reflects what the company owns (assets) and what it owes (liabilities), as well as the equity invested by the owners. The fundamental principle of accounting that underpins the balance sheet is that every asset must be financed either through debt (liabilities) or by equity (owners’ capital).

In essence, the total assets must equal the total of liabilities and owners’ equity because this accounting equation (Assets = Liabilities + Owners' Equity) ensures that all resources are accounted for by a corresponding claim against those resources. This balance signifies that the company's financial statements are in order and provides a basis for stakeholders to assess the financial health of the business.

The other options do not represent fundamental accounting relationships that must balance on the balance sheet. For instance, expenses and revenues are elements of an income statement rather than a balance sheet. Cash and expenses, although they have a relationship, do not represent the fundamental accounting equation essential for a balance sheet. Similarly, while revenue relates to the income statement and liabilities to the balance sheet, they do not directly intersect to meet the balance sheet balancing requirement.