How is the accounting equation expressed?

The accounting equation is a fundamental principle in accounting that represents the relationship between a company's assets, liabilities, and equity. It is expressed as Assets = Liabilities + Equity.

This equation indicates that what a company owns (assets) is financed either by borrowing (liabilities) or by the owners' investments (equity). In essence, it reflects that the total resources of a company (its assets) are funded by the claims against those resources (its liabilities and equity).

Understanding this equation is crucial for anyone studying accounting as it serves as the foundation for the double-entry bookkeeping system, where each financial transaction affects at least two accounts in a way that keeps the equation in balance.