Understanding the Accounting Equation

Front

Accounting Equation

Back

Assets = Liabilities + Equity

Front

Assets

Back

Resources owned by a business

Front

Liabilities

Back

Debts or obligations of a business

Front

Equity

Back

Owner's claim after liabilities

Front

Example of Asset

Back

Cash, Inventory, Equipment

Front

Example of Liability

Back

Loans, Accounts Payable

Front

Example of Equity

Back

Owner's Capital, Retained Earnings

Front

True or False: Assets must always equal Liabilities + Equity

Back

True

Front

Common Mistake: Ignoring Liabilities

Back

Always consider debts in the equation

Front

Formula Rearrangement

Back

Equity = Assets - Liabilities