''ACCOUNTING EQUATION''
Accounting equation may be defined as '' a device by which the financial position of a business can be checked at a glance''
The fundamental accounting equation for each transaction, the debit is equal to the credit.

Assets=There are the things of value possessed by a trader, such as building,furniture.stock and good is called assets.

Liability=These are debts due by a business to its proprietor and others.Liability also defined as the claims of the business of the outsiders against the assets of the liability.

Owner's equity= The amount of cash and goods which the proprietor of the business invest in it is know as his capital and owner's equity.

ASSETS = LIABILITY+OWNER'S EQUITY

                               I can explain accounting equation with the help of example.

• Started business with cash rs. 50000
• purchased merchandise on credit rs.5000
• payment made against a/p rs 4900 in full settlement of rs 5000
• sold merchandise on credit rs.4000 costing rs 3500
• received cash rs 3950 in full settlement of rs 4000.  

                                 ASSETS                                   =                                        EQUITY                           
  CASH      +       MERCHANT    +        A/R                             A/P           +         CAPITAL 
1  50000              ..................              ............           =          .............                   50000
2 ..........             (+) 5000                        ...........         =     (+)  5000                     ............
3(-) 4900                ..............                                       =           -5000                 (+)    100      
4 .........                -3500                       4000                =            ............             (+) 500  
5(+) 3950                                         (-)  4000               =                                     (-) 50
                                                                                                                                               
TOTAL
49050          +       1500                       ..........                  =          ............               50550        

               50550                                                                                  50550              


In this example the two point where company face the profit and loss when company face profit then profit add in owner equity and when company face the loss then loss subtract from owner equity.At the end of all the transaction the debit and credit side are equal.