A record of increases and decreases in a specific asset, liability, equity, revenue, or expense item is referred to as a Financial Account.
When creating and keeping records of financial transactions, it must follow the basic accounting equation in balance. That is, by keeping the basic account equation in balance, each transaction must affect two or more accounts.
The accounting equation is stated as follows:
Assets = Liability + Equity
That is, a company's total assets are proportionate to the sum of its shareholder's equity and its liabilities. Herein lies the foundation of the double-entry accounting system.
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