Accounting Equation | Business

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Accounting Equation

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2nd grade

Business

3 hours ago by

Andrew Oldacre

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Accounting Equation
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The Accounting Equation

Accounting is based upon a very simple idea known as the accounting equation.
The equation is written as:
Assets = Liabilities + Capital

Resources (what they are) = Resources (who supplied them)
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The accounting equation highlights the assets that the business owns and how the business was able to acquire those assets – either through debt (liabilities) or contributions by the owner (capital).
Other forms of the accounting equation:
Capital = Assets – Liabilities
Liabilities = Assets – Capital
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Therefore the accounting equation can be written in three forms:
Assets = Liabilities + Capital
Capital = Assets – Liabilities
Liabilities = Assets – Capital
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Assets= $12,500
Liabilities= $1,800
Find Capital.
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No matter how you present the accounting equation the totals of both sides will always equal each other, and this will always be true no matter how many transactions there may be. The actual assets, capital and liabilities may change, but the total of the assets will always equal the total of Capital + Liabilities.
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