Accounting equation
The accounting equation states that a business's assets equal the claims on them: amounts owed to others (liabilities) plus the owner's claim (equity). Every correctly recorded transaction keeps the equation in balance.
Example
An owner invests $5,000: assets +$5,000, equity +$5,000.
Learn and practice it
What bookkeeping is and why it balances — Bookkeeping records every business transaction so owners can see what they own, owe, and earn. Learn the idea that keeps the books in balance.
Open the lesson