The accounting equation is a rule or you can say formula to calculate the total asset of a company/entity. There are there accounting equations.
- Assets = Liabilities + Owner’s Equity
- Assets = Liabilities + Shareholder’s Equity (For Corporation )
- Assets = Liabilities + Net assets (For Non-Profit Organizations like NGO)
The Balance sheet prepared using this rule. Double entry bookkeeping system formed on the basis of the accounting equation.