In a nutshell, the accounting equation above shows us:
How much of the assets are owedto others (liabilities), and
How much are owned by the owner (equity).
It's as simple as that.
Before you start, I would recommend to time yourself to make sure that you not only get the questions right but are completing them at the right speed.
Difficulty Rating: Beginner
Quiz length: 3 questions
Time limit: 5 minutes
Important:The solution sheet on the following page only shows the solutions and not whether you got each of the questions right or wrong. So before you start, get yourself a piece of paper and a pen to write down your answers. Once you're done with the quiz and writing down your answers, click the Check Your Answers button at the bottom and you'll be taken to our page of solutions.
Does this equation and its meaning still seem a bit tricky right now? If so, don't worry, it will become easier as you continue along.
Read through the following lessons, where I will go into more details about each of the elements of the basic accounting equation, including examples for each one: