Balance sheet equation also known as the accounting equation, is a fundamental principle of accounting that states that the assets of a business are equal to the sum of its liabilities and owners’ equity.
Mathematically, it can be represent as:
Assets = Liabilities + Owners’ Equity
This equation is always in balance, meaning that the value of the assets on one side of the equation will always equal the combined value of the liabilities and owners’ equity on the other side. It is use to ensure that the balance sheet is accurate and complete, and it is an important tool for financial analysis and decision-making.
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