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In this video I attempt to explain the Accounting Equation in less than two minutes.

The Accounting Equation is a formula that sets out the relationship between Assets, Liabilities & Equity. It says that at any given moment, a business's Assets must equal its Liabilities plus Equity. You could call this the backbone of bookkeeping because the accounting equation always has to balance.

The concept at the heart of the Accounting Equation is very simple. The stuff that a business owns is equal to the stuff that a business owes. A business owns Assets and it owes Liabilities & Equity.

Assets are the stuff that a business owns. You can think of them as resources that a business uses to operate and generate profit.

Liabilities are the stuff that a business owes to third parties. These are the debts or obligations that it needs to repay in the future.

Equity is the stuff that a business owes to its owners. It is the owner's claim on the Net Assets of a business.

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⏱️TIMESTAMPS
00:00 - Intro
00:06 - What is the Accounting Equation?
00:52 - What are Assets?
01:13 - What are Liabilities?
01:30 - What is Equity?

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