Accounting Equation

Assets = Liabilities + Shareholder Equity.

If an accountant was Monty Python, this would be his holy grail. The equation comprises the balance sheet, one of the three major financial statements. All the financial statements funnel into the balance sheet. While the equation sounds intimidating, it’s quite simple. Say you have a $10k car and a $6k loan for that car. You have $4k in equity (ownership). Assets ($10k) = Liabilities ($6k loan) + Shareholder Equity ($4k). Simple, right? Now if we could just find our keys.