The short (basic) form of the accounting equation that consists of the three basic accounting elements: assets, liabilities, and equity (capital). In equation form, the basic accounting equation is defined as follows:
Assets = equity + liabilities
Or in shorthand,
A = L + C
Where: A, L, and C, stand for assets, liabilities, and capital (equity), respectively.
As opposed to the expanded accounting equation, the basic equation conceals other accounting elements: revenue, expenses, and drawing (dividends), as all of them are hidden in the capital element (owners’ equity).
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