Bookkeeping Equation

Bookkeeping Equation

The bookkeeping equation for a sole business is assets = liabilities + owner’s equity. The bookkeeping equation for a corporation is assets = liabilities + stockholder’s equity. The bookkeeping equation is also known as the accounting equation.

In this bookkeeping equation, here are the main elements:

  • The resources owned by the business are known as assets
  • The amounts that are owed by the business are known as liabilities
  • The amount invested by the owner along with the net income of the business subtraction the amounts withdrawn by the owner for personal use are known as owner’s equity
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