Assets =
Liabilities +
Equity (also sometimes referred to as "owner's equity", among other things)
This equation is the basis of all accounting. A company's balance sheet is based on this equation.
Both sides of the equation MUST balance. As such, any net change on the left side must be balanced on the right side (and vice versa).
For example, if a company takes out a bank loan for $2000, its cash (an asset) would increase by $2000. However, the note payable to the bank for the loan (which is a liability) would also increase by $2000. Therefore, both sides balance.
This idea of a business transaction affecting both sides of the fundamental accounting equation is known as the dual aspect concept (or principle).
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