The accounting equation defines a company’s total assets as the sum of its liabilities and shareholders’ equity. It's the foundation of the double-entry accounting system.

The expanded accounting equation builds upon the basic accounting equation's use of assets, liabilities and equity by incorporating additional components such as revenues, expenses and withdrawals.

The expanded accounting equation is derived from the accounting equation and illustrates the different ... The formula for the basic accounting equation is as follows: Assets = Liabilities + Owner ...

The accounting equation is based on the balance sheet. It tells us that assets plus liabilities equals equity. The difference in what you have and what you owe should ideally be a positive number ...

The relationship between liabilities and assets is that the former often pays for the latter. A company can either pay for its assets using loans (liabilities), or shareholder investments (equity).