Overview
The accounting equation is a fundamental concept in accounting that illustrates the relationship between a company's assets, liabilities, and equity. It is expressed as Assets = Liabilities + Equity, ensuring that a company's balance sheet remains balanced. Understanding this equation is crucial for...
Key Terms
Example: Cash, inventory, and property.
Example: Loans and accounts payable.
Example: Common stock and retained earnings.
Example: A snapshot of a company's financial position at a specific date.
Example: Income statement, balance sheet, and cash flow statement.
Example: If assets are $100,000 and liabilities are $40,000, net worth is $60,000.
Related Topics
Financial Statements
Understanding the different types of financial statements and their purposes.
intermediateDouble-entry Accounting
Exploring the principles of double-entry accounting and its importance in financial reporting.
intermediateCash Flow Management
Learning how to manage cash flow effectively for business sustainability.
intermediateKey Concepts
AssetsLiabilitiesEquityBalance Sheet