Define: Accounting Equation

UK Accounting Glossary

Definition: Accounting Equation

Quick Summary of Accounting Equation

The relationship between assets, liabilities and ownership interest.

What is the dictionary definition of Accounting Equation?

Dictionary Definition

Also known as the balance-sheet equation, The accounting equation is the underlying formula of a balance sheet.

It is expressed as: assets = liabilities + capital.

An increase (or decrease) in the total assets of a concern needs to be accompanied by an equal movement in the liabilities and capital in order to ensure that they always balance.

Hence, the balance in balance sheet.

This formula expresses an entity view of a business, whereas an proprietary view deducts liabilities from assets to calculate an owners’ stake in a business.


Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Accounting Equation. Payroll & Accounting Heaven Ltd. February 29, 2020
Chicago Manual of Style (CMS):
Accounting Equation. Payroll & Accounting Heaven Ltd. (accessed: February 29, 2020).
American Psychological Association (APA):
Accounting Equation. Retrieved February 29, 2020, from website:

Definition Sources

Definitions for Accounting Equation are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 23rd December 2018.