I am taking a “finance for non-finance managers” mini training for my job (so I can better understand the corporate nonsense jargon presented during quarterly meetings), but I’m already stuck on the first part of the training, which is about the “accounting equation”.
The equation in the training is listed as Assets = Liabilities + Owner’s Equity.
Why is this equation written this way? It doesn’t make sense. A company has assets, and it owes liabilities. Whatever *is left over* is equity. So shouldn’t it be written as:
**Assets – Liabilities = Owner’s Equity**
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I understand, mathematically, that it’s all the same thing. But as far as messaging goes (syntax, context, etc), why would the equation be specifically written in this way?
In: Economics
>But as far as messaging goes (syntax, context, etc), why would the equation be specifically written in this way?
This may sound pity, but it’s the truth: You’re taking an accounting class, not a marketing class. They don’t care about the “messaging”. They’re doing math. They’re going to plug all of this into a spreadsheet, and what’s important in accounting is that the equations are formulated in such a way as to make the math flow more easily (which, generally speaking, means that your equations will be written with a view of the whole system in mind, not just how each individual equation looks).
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