# Explain how the accounting equation is used?

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Video answer: What is accounting? the basic accounting equation

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Double-entry accounting uses the accounting equation **to show the relationship between assets, liabilities, and equity**. When you use the accounting equation, you can see if you use business funds for your assets or finance them through debt. The accounting equation is also called the balance sheet equation.

Video answer: The accounting equation |what is the accounting equation |assets | liabilities |owners equity

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The accounting equation is a basic principle of accounting and a fundamental element of the balance sheet. Assets = Liabilities +

What Is the Accounting Equation Used for? One of the main benefits of using the accounting equation is the fact that it provides an easy way to verify the accuracy of your bookkeeping. It also helps measure the profitability of your business. Are your liabilities significantly higher than your assets?

The accounting equation is used to capture the economic effects of financial activities in a business: Assets = Liabilities + Ownerâ€™s Equity, shown in the balance sheet. Home Features

Accounting equation describes that the total value of assets of a business is always equal to its liabilities plus ownerâ€™s equity. This equation is the foundation of modern double entry system of accounting being used by small proprietors to large multinational corporations.

The accounting equation is a tool used to make sure that the balance sheet maintains the equilibrium between the debit side and the credit side. Any organization, irrespective of its size, uses two main balance sheet components: assets and liabilities.

The accounting equation equates a companyâ€™s assets to its liabilities and equity. This shows all company assets are acquired by either debt or equity financing. For example, when a company is started, its assets are first purchased with either cash the company received from loans or cash the company received from investors.

The accounting equation is a mathematical formula that is used to show the relationship between a company's assets, liabilities and equity. Also called the "balance sheet equation", this formula is used to serve as the foundation for double-entry bookkeeping.

The accounting equation is the foundation of double-entry bookkeeping which is the bookkeeping method used by most businesses, regardless of their size, nature, or structure. This bookkeeping method assures that the balance sheet statement always equals in the end.

What is the accounting equation? Double-entry accounting uses the accounting equation to show the relationship between assets, liabilities, and equity. When you use the accounting equation, you can see if you use business funds for your assets or finance them through debt. The accounting equation is also called the balance sheet equation.