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Basic accounting equation is what drives double-entry bookkeeping. The equation reflects the accounts reported in the balance sheet. The basic accounting equation is as follows: ASSETS LIABILITIES + OWNERS' EQUITY This is a very simple algebraic equation that reflects that the assets of an entity must be supported by either debt or equity. As in algebra if we add or subtract something from one side of the equation we must add or subtract the same amount on the other side of the equation.

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