The Fundamental Accounting Equation

As a rule of thumb, work in the field of accounting ranging from the knowledge base called “the fundamental accounting equation”. The fundamental accounting equation is as follows:

Assets = Liabilities + Owner’s Equities

If Owner’s Equities       =     Preferred Stocks + Common Stocks + Additions Paid in Capital + Translation FX currency + Retained Earnings
and
Equities                        =     Preferred stocks + Common Stocks + Additions Paid in Capital + Translation FX Currency
then
    Asset                        =     Liabilities + Equities + Retained Earnings
    Assets                       =    Liabilities + Equities + Revenues – Expenses
    Assets + Expenses     =     Liabilities + Equities + Revenues

Assets, liabilities, equities, expense, and revenues are called the elements of financial statement. The first three are the elements of balance sheet and the last two are the elements of income statement.