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Why do total assets equal the sum of total liabilities and equity? Explain.

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Question added by Divyesh Patel , Assistant Professional Officer- Treasury , City Of Cape Town
Date Posted: 2014/04/06
Khaleel Ullah
by Khaleel Ullah , Head - Procurement Team , Middle East Technical Services Est.

As we follow Double Entry System, where every debit has and equal and corresponsing credit. So, at the end of the day Assets will be equal to liabilities.

Ali Hammad Naeem
by Ali Hammad Naeem , Chief Executive Officer , Concern Worldwide Media Clicks (Pvt.) Limited Chattha Group of Travels

Assets means things/investments/ you have

Liabilities means which you have to pay

and any difference is owner's equity (In other terms = Net Profit + initial capital from owner)

Means anything under business property - anything business have to pay will be Owner's Equity

 

In double entry this relationship is well defined when we say Assets=Liabilities + Owner's Equity

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