Basic Accounting Equation


Previous lesson: Define Accounting
Next lesson: What Are Assets?






Accounting as a whole is based on a single equation:

ASSETS = EQUITY + LIABILITIES


Balance in accounting

The word equation comes from the word equal.

For any equation, one side always equals another. Also, equations can be made out of anything.

For example:
1 Orange = $0,50
House = Walls + Doors + Windows + Roof
1 week = 7 days

So what does the accounting equation mean? Well, in order to answer that question we need to look at what each of the terms in the equation mean...

1. Assets
2. Liabilities
3. Owners Equity




Previous lesson: Define Accounting
Next lesson: What Are Assets?



Read Other Questions Relating to This Lesson
(along with their answers)

Click below to see questions and solutions on this same topic from other visitors to this page...

Journal Entry - Capital Investment 
What is the journal entry for the following: Business started with capital rs (Rupees = Indian currency) 25000

Accounting Equation Exercises 
Q: Tom Jones is the owner and operator of Jones Enterprise, a motivational consulting business. At the end of its accounting period, December 31, 2009, …

What is an Outstanding Salary? 
What is the definition of outstanding salary??

Accounting Concepts Questions 
1 What is the difference between historical cost and prudence concept in accounting? 2 In accounting concept what is the difference between …

MAIN PURPOSE OF
ACCOUNTING EQUATION
 
Q: WHAT IS THE MAIN PURPOSE OF THIS ACCOUNTING EQUATION?

Internal Balance Sheet and
Accounts Receivable
 
Can anyone please provide examples of the internal balance sheet and income statement interactions relating to accounts receivable?



Return from The Basic Accounting Equation to Basic Concepts

Return from The Basic Accounting Equation to Home Page

New! Comments

Have your say about what you just read! Leave me a comment in the box below.

Search this site:


All the lessons on this site, plus much, much more...

Available Now On


Get Your Degree!

Find schools and get information on the program that’s right for you.

Powered by Campus Explorer


Subscribe to
The Student Accountant newsletter

Your E-mail Address
Your First Name (optional)
Then

Don't worry — your e-mail address is totally secure.
I promise to use it only to send you The Student Accountant.