Accounting Equation : A(ssets) = L (iabilities) + OE (Owner’s Equity), The formula depicts the relationships of the various elements of the Balance Sheet to each other. Often the relationships between Assets (A), Liabilities (L), and Owner’s Equity (OE) are shown in terms of a formula.
Accounting Equation
A = L + OE
Assets = Liabilities + Owner’s Equity
The total Assets of the company equal the sum of the Liabilities and the Owner’s Equity.
The formula depicts the relationships of the various elements of the Balance Sheet. Balance Sheets are often set up with the Assets on one side (the left side) and the Liabilities and equity on the other (the right side).
The same formula can be stated this way :
A – L = OE
Assets – Liabilities = Owner’s Equity
If you subtract the Liabilities from the Assets, you are left with the Owner’s Equity of the business.