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Accounting equation is ASSET= Liablities+owner equity
If liabilties are zero then ASSET= Owner Equity
Owner Equity =Asset -Liabilites
as its double entry so every transaction have to effect and equalized it
First you should have knowledge about these concepts that what is ASSETS, LIABILITIES, OWNER’S EQUITY & BUSINESS SEPARATE LEGAL ENTITY, then you will learn quickly about this equation. Accounting Equation is a base of double entry system. Therefore teachers also first prefer to teach this basic concept before teaching the double entry system or accounting cycle. The accounting equation equates a company's assets to its liabilities and equity. This equation tells us that:-
1- Asset=Liability + Owner's Equity, these are two sides in equation
2- Every business transaction effects two accounts in equation. one effect on Asset Side and the other one on Liability + Owner's Equity side or both effects could be on one of the both sides but depends on nature of transaction.
3- Left side always is equal to Right Side
4- Its result shows that what company owns and owes.
after this when you will start to learn accounting cycle then you will come to know that these both sides are named by DEBIT & CREDIT. DEBIT is left side and CREDIT is right side and DEBIT always is equal to CREDIT.
