Page
The Basic Accounting Equation (BAE)
Completion requirements
View
Click here to view a video on the Accounting Equation.
The financial situation for any business can, at any time, be expressed in terms of the basic accounting principal. This equation is also applicable to the individual’s situation. The basic equation is as follows:
EQUITY (E) = ASSETS (A) – LIABILITIES (L)
Where:
- Equity is the funds or capital provided by the owners of the business or undrawn profits.
- Assets are items purchased by the business or funds in hand.
- Liabilities are the funds borrowed by the business.