CBSE Class 12-commerce Answered

• It is a mathematical expression based on the dual aspect concept which shows that the assets and liabilities of a firm are equal i.e., Assets = Liabilities + Capital
• It is also known as Balance Sheet Equation.
• It is based on the accounting concept of Dual Aspect, according to which every transaction has two aspects namely, debit and credit.
• It means, total claims of outsiders and of the proprietors will always be equal to the total assets of the firm. These claims are known as equities which are of two types namely, Owner’s equity or capital and Liabilities or amounts due to outsiders.
• It can be expressed in the following ways:

• Assets = Equities (Total Claims) or
• Assets = Liabilities + Capital or
• Liabilities = Assets – Capital or
• Capital = Assets – Liabilities

Complete concept along with the related questions are provided on our website under the chapter Accounting Equation.