1. What is the Accounting Equation?

The accounting equation (Assets = Liabilities + Equity) is the foundation of double-entry bookkeeping and represents the relationship between a company's resources (assets) and the claims against those resources (liabilities and equity).

2. How Does the Calculator Work?

The calculator uses the fundamental accounting equation:

Where:

• Assets — Resources owned by the business (cash, inventory, property)
• Liabilities — Debts or obligations owed by the business
• Equity — Owner's claim on the business assets after liabilities are paid

Explanation: The equation must always balance. If you know two values, the calculator will find the third.

3. Importance of the Accounting Equation

Details: This equation is crucial for financial reporting, ensuring accurate balance sheets, and maintaining proper accounting records. It's the basis for all financial transactions in a business.

4. Using the Calculator

Tips: Enter any two known values (in the same currency) and leave the third field as zero. The calculator will compute the missing value. If all three fields have values, it will verify if the equation balances.

5. Frequently Asked Questions (FAQ)

Q1: What if my equation doesn't balance?
A: This indicates an accounting error. Check for data entry mistakes, omitted transactions, or incorrect valuations.

Q2: Are there different types of assets and liabilities?
A: Yes, assets can be current (short-term) or non-current (long-term). Liabilities are similarly classified as current or non-current.

Q3: How does equity change?
A: Equity increases with owner investments and profits, and decreases with withdrawals and losses.

Q4: Can this equation be used for personal finance?
A: Yes, the same principle applies - your personal assets equal what you owe (liabilities) plus your net worth (equity).

Q5: What currency should I use?
A: Use your local currency or the reporting currency of your business. All values must be in the same currency.