The Accounting Equation

Question 1

Why does the accounting equation always balance

Answer 1

whatever assets you have, there are equities that provided those assets.

Question 2

Accounting equation and its variables

Answer 2

Assets = Liabilities + Owner’s Equity
Liabilities = Assets - Owners equity
Owners equity = Assets - Liabilities

Question 3

Equities

Answer 3

claims on the assets of the firm. That is, liabilities are what the business owes to external parties, while owner’s equity is what the business owes to the owner. Liabilities and owners equity are both equities. And both of these claims must be funded from the business’s assets.