what is the accounting equation 
the accounting equation states that a company s total assets are equal to the sum of its liabilities and its shareholders equity this straightforward relationship between assets liabilities and equity is considered to be the foundation of the double entry accounting system the accounting equation ensures that the balance sheet remains balanced that is each entry made on the debit side has a corresponding entry or coverage on the credit side the accounting equation is also called the basic accounting equation or the balance sheet equation daniel fishel investopedia