What is Accounting Equation Formula?

The Accounting Equation Formula, also known as the Fundamental Accounting Equation or Balance Sheet Equation, is a mathematical expression that represents the relationship between a company’s assets, liabilities, and owner’s equity. The formula is: Assets = Liabilities + Owner’s Equity. It demonstrates that the total value of a company’s assets is equivalent to the sum of its liabilities (obligations) and owner’s equity (investments and retained earnings). This formula serves as the foundation for double-entry bookkeeping, ensuring that every transaction maintains the balance between the resources and claims on those resources within a company.