Accounting equation calculator

How to read the result

The tool rearranges the equation for whichever figure you choose: Capital = Assets − Liabilities, Assets = Capital + Liabilities, or Liabilities = Assets − Capital. The two sides should always match. If they do not in your own work, an entry has gone in on the wrong side.

Try changing one figure and watch the third adjust so the equation still balances.

The accounting behind it

The accounting equation is the idea the whole subject is built on. Everything a business controls (its assets) was funded from one of two places. Either the owner put it in or left profit in the business (capital), or it is owed to outsiders (liabilities).

That is why Assets = Capital + Liabilities can never be broken. The two sides are the same money counted two ways. Rearranging gives Capital = Assets − Liabilities. This is the owner's stake, also called net assets, and it is the figure the statement of financial position is built to show.

Watch how a transaction keeps the equation in step. If the owner pays RM10,000 into the business bank account, assets rise by RM10,000 and capital rises by RM10,000. If the business then buys a RM4,000 computer on credit, assets rise by RM4,000 and liabilities rise by RM4,000.

After each event both sides still agree, here at RM14,000, because every transaction has two equal effects. Double entry records exactly that, so a firm grasp of this equation makes debits and credits easier to learn.

When a teacher's eye helps

Students usually know the formula. They stumble when a question hides one figure and asks them to work it back, or when drawings and profit have to be added into capital first. If your child can state the equation but freezes on those twists, one of our teachers can work through a few transactions with them until the pattern clicks. Bring a question that is causing trouble to a trial class.