What Is the Accounting Equation, and How Do You Calculate It?

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Understanding the Core Components of the Accounting Equation

1. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.
2. Assets, liabilities, equity and the accounting equation are the linchpin of your accounting system.
3. The company’s assets are equal to the sum of its liabilities and equity.
4. For example, a positive change in plant, property, and equipment is equal to capital expenditure minus depreciation expense.

Limitations of Accounting Equation