Blog 2 – – Accounting equation
In our first blog, we introduced accounting and its branches. Now, let us explore the accounting equation: a simple relationship that explains what a business owns and how it is financed.
Assets = Liabilities + Capital
Assets are resources the business owns or controls, such as cash, furniture, machinery, inventory and amounts receivable from customers. Liabilities are amounts the business owes to others, such as bank loans and amounts payable to suppliers. Capital is the owner's interest in the business after deducting liabilities from assets.