CIMA BA3 Syllabus A. ACCOUNTING PRINCIPLES, CONCEPTS AND REGULATIONS - Accounting equation - Notes ^{15 / 22}

Accounting equation

The accounting equation makes use of three of the elements of the financial statements as follows:

Assets = Liabilities + Capital

It therefore demonstrates the relationships that exist within any business entity. 

It is important that you understand the following distinctions:

• Assets — Liabilities = Capital

  or, it can be restated as:

  Assets = Capital + Liabilities