Which one of the following accounting equations is incorrect?

The fundamental accounting equation is:

$$\text{Assets} = \text{Owners' Equity (OE)} + \text{Liabilities}$$

Owners' Equity can be expanded as:

$$\text{Owners' Equity (OE)} = \text{Capital} + \text{Income} - \text{Expenses} - \text{Drawings}$$

$$\text{Assets} = (\text{Capital} + \text{Income} - \text{Expenses} - \text{Drawings}) + \text{Liabilities}$$ $$\text{Assets} = \text{Capital} - \text{Drawings} + \text{Income} - \text{Expenses} + \text{Liabilities}$$

• a. Assets = Capital - Drawings + Income - Expenses + Liabilities This matches the expanded form derived in Step 3. So, this equation is correct.

• b. Assets = OE + Liabilities This is the fundamental accounting equation. So, this equation is correct.

• c. Assets = Capital - Drawings + Income - Expenses - Liabilities Comparing this to the correct expanded form (Assets = Capital - Drawings + Income - Expenses + Liabilities), the sign for Liabilities is incorrect (it's - Liabilities instead of + Liabilities). So, this equation is incorrect.

• d. OE = Assets - Liabilities This is a rearrangement of the fundamental accounting equation (subtracting Liabilities from both sides of Assets = OE + Liabilities). So, this equation is correct.

The incorrect accounting equation is option c.

$\boxed{\text{c. Assets = Capital - Drawings + Income - Expenses - Liabilities}}$