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
accounting is done from the perspective of the business, not the owner. while the two equations you have are equivalent. they are used to calculate different things. when calculating the business’s assets you have the first equation. when you’re calculating the owner’s equity, you can use the second.
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