The fundamental Accounting Equation

 

Assets – Liabilities = Net Worth Liabilities + Net Worth = Assets

Asset: anything of value OWNED. Example: cash, car, clothing, furniture, equipment…

Liability: A debt, something that is OWED. Example: bank loan, money owed to a partner, unpaid telephone bill…

Net Worth: the DIFERENCE between Assets and Liabilities. It is also called Capital and Owner’s Equity.