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Accounting Equation
Fundamental formula that establishes a relationship between assets, liabilities, and equity. A= L+E
Assets
Resources that the business owns and use to operate and generate profit. Examples include cash, inventory, and equipment
Liabilities
Resources that a business owes to third parties or a financial obligation that needs to be paid back.
Equity
Ownership’s claim of the net assets of a business. Remains after you subtract liabilities from assets.