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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.

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