Accounting Equation

The Accounting equation is : Assets minus Liabilities equals Owners Equity

Your own home is a great example:

• The house and land is the asset.
• The mortgage to the bank is the liability.
• The difference between the two is your equity.

 Let's say your home has a value of $650,000 (asset).

 Let's say your mortgage to the bank is $350,000 (liability).

 The difference between the two is all yours – the equity, which in this example is $300,000.