Accounting is unnatural. I'm trying to cram the details here... why is it that a liability is ADDED to equity to
figure assets. Shouldn't liability be SUBTRACTED from the equity?
Answers:
Because both sides of the ledger own to set off..
What you dont owe on your assets is equity.
Try these. Assets are what you own in the business. Now, how did you come to own these assets? It is any you bought them near your own funds (which represents equity) or you bought them from the money you borrow from others (which represents liabilities).
The formula A = L + E shows what amount of the assets you borrow from others and what amount you really own.
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Answers:
Because both sides of the ledger own to set off..
What you dont owe on your assets is equity.
Try these. Assets are what you own in the business. Now, how did you come to own these assets? It is any you bought them near your own funds (which represents equity) or you bought them from the money you borrow from others (which represents liabilities).
The formula A = L + E shows what amount of the assets you borrow from others and what amount you really own.