The most important accounting formulas are practical and intuitive, making them easy to remember and apply.

The expanded accounting equation builds upon the basic accounting equation's use of assets, liabilities and equity by incorporating additional components such as revenues, expenses and withdrawals.

From the principles of accounting, the accounting equation states that the total assets of a company equals the sum of its liabilities and equity contributions on the balance sheet.

This formula is also known as the accounting equation or the balance sheet equation. The balance sheet holds the data needed for the accounting equation.

Total assets are also the sum of its total liabilities and shareholder equity because of the balance sheet accounting equation. Both types of financing are used to fund a company’s operations.

Effects of Theft on the Accounting Equation. A bedrock principle of business bookkeeping is that the accounting equation must always balance: Your assets must always equal your liabilities plus ...