accounting equation

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Accounting Equation

A brief equation describing the relationship between the assets and the liabilities of a company. In other words, the accounting equation describes how a company's resources relate to the persons or entities with claims on those resources. It is stated as:

Assets = Liabilities + Owners' Equity.

accounting equation

the idea that capital is equal to assets minus liabilities, and thus may be expressed as C = A – L. This may also be described as ‘the balance sheet identity’. See BALANCE SHEET.
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