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Accounting Equation Guide
The accounting equation is the foundation of every set of books: Assets = Liabilities + Equity. Everything the business owns was paid for either by owing someone or by the owner's money and profit.
Assets = Liabilities + Equity
Assets
What the business owns
Liabilities
What the business owes
Equity
Owner's money and profit
Equation Calculator
Enter any two values. The calculator solves for the missing third value.
Enter at least two values to calculate the third.
What Changes?
Common business events and how they affect the equation.
Owner contributes cash
Assets ↑Equity ↑
Business borrows money
Assets ↑Liabilities ↑
Business buys equipment with cash
One asset ↑Another asset ↓Total assets unchanged
Business earns revenue
Assets or A/R ↑Equity ↑
Business pays an expense
Assets ↓Equity ↓
Owner takes a draw
Assets ↓Equity ↓