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
> A company has assets, and it owes liabilities. Whatever is left over is equity.
The concept is that if the company has a liability then they presumably gained something of equivalent value so their assets should rise by that amount. If they took out a loan for $50 million then they should have some asset worth that $50 million; their assets *rise* by that $50 million because of the thing they have, they don’t *lower* by the $50 million because they owe it.
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