Why Do Assets Equal The Sum Of Liabilities And Equity?


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A Balance Sheet is a current picture that reveals strengths and/or flaws of an organization's financial condition.  The standard accounting equation for a Balance Sheet is:
Assets = Liabilities + Equity but you could switch it around like this: Assets - Liabilities = Equity (or net worth)

The Balance Sheet helps to answer the question of HOW the organization is doing.

With that in mind, the equation could be rewritten like this:
WHAT we have - WHERE we got what we have = HOW we are currently doing financially as an organization

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