The Accounting Equation Explained 1. Assets: What a company owns, such as cash, equipment, or inventory. 2. Liabilities: What a company owes to others, like loans or accounts payable. 3. Equity: The owners' stake in the company after all liabilities are paid, also known as shareholders' equity. The fundamental principle is that a company's assets must always equal the sum of its liabilities and equity. Financial Accounting #financialaccounting | Financial Accounting