I have calculated the answer to be B but don’t completely understand why we don’t include his life savings and borrowings?
It's because of timing: the life savings and borrowings were put in when the business started (ie a number of years ago). We're interested in 'assets - liabilities' now, not when the business started. If we did include the life savings and borrowings, we'd be double-counting to some extent, eg some of that money may have been used to buy the office and equipment. Hope this helps clarify things Lynn