Discuss the Accounting equation

Earlier it was stated that the accounting entity concept regards the business as a separate accounting entity from its owner. The formula for the Accounting Equation extends this concept.

The Accounting Equation is: Assets − Liabilities = Equity. In an abbreviated form this is A − L = EQ.

By simple transposition the Accounting Equation can also be shown as:

1. Assets = Liabilities + Equity (A = L + EQ)

2. Assets −Equity = Liabilities (A − EQ = L).