Business Essentials, 12/e

The Accounting Equation

1. Objective 15-2 Explain how the accounting equation is used.

All accountants rely on record keeping to enter and track transactions. Underlying all record-keeping procedures is the most basic tool of accounting, the accounting equation:

$$\text{Assets}=\text{Liabilities}+\text{Owners'}\text{Equity}$$

Accounting Equation

Assets = Liabilities + Owners’ Equity; used by accountants to balance data for the firm’s financial transactions at various points in the year

An asset is an economic resource that benefits the firm. Apple’s assets include retail outlets and the inventories of Apple products that the stores keep on hand to sell to customers.