What is the accounting equation?

[niyati]

I keep hearing about the accounting equation, but I’m not sure what it actually represents or why it’s so essential in accounting. Can someone explain what the equation is

 

[Jarwish]

The accounting equation is: Assets = Liabilities + Owner’s Equity

It shows that a company's resources (assets) are financed by debts (liabilities) and the owner's investment (equity). This fundamental equation keeps the balance in double-entry accounting.

 

[jainnorton]

The accounting equation is:

Assets = Liabilities + Owner’s Equity

It ensures a company’s balance sheet stays balanced, showing that resources (assets) are funded by debts (liabilities) and owner investments (equity).

 

[maria]

A foundational idea in accounting is the accounting equation, which reads: Assets = Liabilities + Owner's Equity. The fundamental relationship between a company's assets, liabilities, and owner equity is represented by this equation.