What is the full accounting equation?

The full accounting equation is correctly stated as Assets = Capital + Liabilities. This fundamental equation reflects the relationship between a company's resources (assets) and the claims against those resources (capital and liabilities). In a balanced accounting system, the total assets must equal the total of liabilities and equity (or capital).

This relationship is crucial in ensuring that all financial transactions are properly recorded and that the financial statements accurately represent the company's financial position. It highlights how a company finances its assets—either through borrowing (liabilities) or through investments made by owners or shareholders (capital).

Understanding this equation is essential for anyone in business management and administration, as it forms the foundation for analyzing financial statements, making informed business decisions, and maintaining accurate accounting records.