MAIN PURPOSE OF
Q: WHAT IS THE MAIN PURPOSE OF THIS ACCOUNTING EQUATION?
A: The main purpose of the basic accounting equation
is to show the real-life financial condition or position for a business.
The basic accounting equation shows that a business is composed of useful items (assets)
, which are owned by the owner or owners (equity)
, and that there are certain business debts (liabilities)
, in other words the assets are partly owned
and partly owed
to people outside the business.
Different people are interested in the financial position
of the business for different purposes. I describe these different people on this page on accounting reports.