ABSTRACT
The balance sheet equation relates to the fact that assets minus liabilities
equals owners’ equity. The equation can also be stated as assets equal
liabilities plus owners’ equity.
Underlying the first equation is the notion that the value of the owners’
equity in a business equals the surplus assets that would remain
following acquittal of all liabilities. Sense can also be made of the second
equation as a business raises money and then invests the money in various
assets.
