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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

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?

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