Accounting equation

Accounting equation,

Definition of Accounting equation:

  1. The accounting equation is considered to be the foundation of the double-entry accounting system. The accounting equation shows on a company's balance sheet whereby the total of all the company's assets equals the sum of the company's liabilities and shareholders' equity.

  2. Assets = liabilities + owners equity. The most fundamental equation of double-entry bookkeeping system, it expresses the relationship between what is owned and what is owed by an entity.

  3. Based on this double-entry system, the accounting equation ensures that the balance sheet remains “balanced,” and each entry made on the debit side should have a corresponding entry (or coverage) on the credit side.

How to use Accounting equation in a sentence?

  1. Both liabilities and shareholders' equity represent how the assets of a company are financed.
  2. When you want to try and figure out what your net worth is you can use the accounting equation to figure it out.
  3. The liabilities represent their obligations.
  4. Before I could run the business, my dad told me that I must figure out how to read an accounting equation .
  5. Financing through debt shows as a liability, and financing through issuing equity shares appears in shareholders' equity.
  6. The accounting equation shows on a company's balance sheet where the total of all the company's assets equals the sum of the company's liabilities and shareholders' equity.
  7. The accounting equation is considered to be the foundation of the double-entry accounting system.
  8. Assets represent the valuable resources controlled by the company.
  9. If you want to find out how much money you really are making you can use the accounting equation to find your bottom line.

Meaning of Accounting equation & Accounting equation Definition