 # Accounting Equation

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### What is the Accounting Equation? Meaning.

The Accounting Equation is the foundation of many double-entry accounting systems, which state that assets equal liabilities plus owners' equity.

In other words, the two sides of the equation must always be in balance

The accounting equation is:

Assets = Capital + Liabilities

The accounting equation can also be written as:

Capital = Assets - Liabilities

Another variation of the accounting equation is to write it as:

Liabilities = Assets - Capital

Instead of the word 'Capital' you may also find 'Owners Equity' or 'Shareholders' Equity' or 'Stockholders' Equity' being used, which all indicate the same.

### Expanded Accounting Equation

Capital can be split up in a number of elements, resulting in the so called 'expanded accounting equation':

Assets = Capital + Liabilities = (Common Stock + Retained Earnings - Dividends + Revenues - Expenses) + Liabilities

### Usages of Accounting Equation. Applications

• Bookkeeping
• Investing

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