The accounting equation is a fundamental principle in financial accounting, representing the relationship between an entity's assets, liabilities, and owner's equity. It ensures that a company's balance sheet remains balanced and reflects the true financial position.
The Balance-Sheet Equation, also known as the Accounting Equation, forms the foundation of double-entry bookkeeping, encapsulating the relationship between a company’s assets, liabilities, and equity.
The Dual Aspect principle asserts that every financial transaction affects at least two accounts, ensuring that the accounting equation remains balanced.
The Entity View emphasizes the importance of distinguishing the business or organization from its owners, based on the accounting equation.
A comprehensive look at the expanded accounting equation, its components, formula, and practical application in financial accounting.
