The Balance Sheet Equation: Assets = Liabilities + Equity
Assets = Liabilities + Equity isn't an accounting convention — it's an identity. Everything the business owns was paid for either with someone else's money or the owner's.
Calculating total assets
Add everything owned at realistic value: cash and bank balances, money owed to you, inventory, equipment and vehicles (minus accumulated depreciation), property. Total assets formula: current assets + fixed assets + any intangibles you can defend.
Liabilities, and what's left
Total liabilities = everything owed: payables, cards, taxes due, loans, mortgages. Then equity — the number people actually want — is simply assets minus liabilities. Positive means the business owns more than it owes; negative is a conversation with your accountant.
Why it always balances
Because equity is defined as the difference, the equation can't NOT balance — unless something was missed or double-counted. That's what makes the check useful: if your sheet is off by $3,000, that's a real forgotten loan or phantom asset, and the generator's live totals help you hunt it down.
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