What Is The Importance Of Accounting Equation?


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The accounting equation (asset = liabilities + owners equity)has great importance because it reveals the company's financial standing at a particular time. The financial standing is important to investors who may wish or have purchased stock in the business. Also the financial standing of the organization is important to creditors who wish to loan the business money. The company’s goal is to have resources that have no claims in opposition to them.
Examples of Asset Account:
Cash, Inventory, Equipment
Examples of Liability Account:
Account Payable and Notes Payable
Examples of Owner's Equity Account:
Capital Stock and Retained Payable
Asset (Resources)
Liability(Method of financing resources that require repayment)
Owner's Equity(Method of financing resources that does not require repayment and represent ownership interests in the business)

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