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The accounting equation is a fundamental similarity between the assets, liabilities and equity of a company, which depicts that resources should always equal the claim made against those resources. It can be represented as Assets = Liabilities + Equity that describes the way businesses finance their operations and keep the accounts balanced. This equation makes sure the system of the double-entry bookkeeping is correct, as there is a credit of the debit. It also assists those who use financial statements to know whether the operations are funded primarily through borrowing or ownership. Using this equation, accountants are able to evaluate the effects of the transactions, ensure that there is financial accuracy, and transparency throughout all the financial reporting processes. what is the accounting equation