The accounting equation, Assets = Capital + Liabilities, is the cornerstone of financial accounting. It shows the relationship between a company's assets, what it owes (liabilities), and what the owners have invested (equity). This equation is essential for creating balance sheets, a vital financial statement that provides a snapshot of a company's financial position at a specific moment, aiding in financial assessment and decision-making.
How to prepare it?
The format of the accounting equation is given below.
