ACCOUNTING EQUATION Definition

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ACCOUNTING EQUATION is a mathematical expression used to describe the relationship between the assets, liabilities and owners equity of the business model. The basic accounting equation states that assets equal liabilities and owners equity, but can be modified by operations applied to both sides of the equation, e.g., assets minus liabilities equal owners equity.

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SHAREHOLDERS EQUITY is total assets minus total liabilities. It is the same as EQUITY, NET WORTH and stockholder's equity.

PREFERENCE SHARE see PREFERRED STOCK.

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