Accounting equation - Financial definition
Concise definition of the term accounting equation
The accounting equation establishes the relationship of equality between a company's assets on one side, and its liabilities and equity on the other side. It is the basis of double-entry bookkeeping.
Comprehensive definition of the term accounting equation
The accounting equation can be expressed as follows:
Assets = Liabilities + Equity
in order for the equation to be valid, the total debits and total credits for each transaction need to be equal.