Accounting equations

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. Based on this double-entry system, the accounting equation ensures that the balance sheet remains â??balanced,â?? and each entry made on the debit side should have a corresponding entry (or coverage) on the credit side. Assets represent the valuable resources controlled by the company. The liabilities represent their obligations. Both liabilities and shareholders' equity represent how the assets of a company are financed. Financing through debt shows as a liability, and financing through issuing equity shares appears in shareholders' equity. Accounting Equation Formula is Assets=Liabilities+Owner's Equity

Madhuri Veluri

CA Inter

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10-Aug-20 11:47