The accounting equation is the basic formula on which the double entry bookkeeping system is formula
The accounting equation is the basic formula on which the double entry bookkeeping system is formulated. It portrays the value relationship between the amount of assets, liabilities, and owners' equity of the company, represented as: Assets = Liabilities + Equity
This equation clearly shows that at any time, the aggregated sum of the assets of an enterprise equals the summation amount of its liabilities plus the equity. It represents the financial situation of the business at a particular point of time.