General Accounting Equation

posted Feb 4, 2010, 5:45 AM by Prof Kiernan
Assets = Liabilities + Stockholder's Equity

English Translation:
Assets are things like Cash, Supplies, Land, Buildings, Equipment, Big shiny metal things, etc.
Liabilities are bills and frequently have the key word "payable". i.e. accounts payable, notes payable, etc.
Stockholder's equity is the net worth of the company. Stockholder's equity normally has something to do with stocks or has the key words "expenses, revenues, or earned."

Note: Every transaction has 2 sides to it, however there does not have to be an increase and a decrease, the transaction may compose of: two increasing accounts, two decreasing accounts, or one account that increases while the other decreases.