What are Accounting Equation?

The Accounting Equation, also referred to as the Fundamental Accounting Equation or Balance Sheet Equation, establishes a fundamental principle in accounting. It declares that the assets of a business are equal to the combined value of its liabilities and owner’s equity. Expressed as Assets = Liabilities + Owner’s Equity, this equation forms the basis of double-entry bookkeeping, guaranteeing the accurate representation of a company’s resources and financial claims. It provides a foundational framework for maintaining balanced and precise financial records.