About the Accounting Equation Calculator
This accounting equation calculator solves the fundamental balance sheet identity — assets = liabilities + owner’s equity — for whichever figure you do not know. Pick the value to solve for, enter the other two and it returns the missing number along with the debt ratio and debt-to-equity ratio that the same three figures imply.
Switch on the expanded accounting equation when you want equity built up from its parts: contributed capital (or opening equity) plus revenue, minus expenses, minus dividends or owner drawings. That is the form used in bookkeeping courses and when checking that a trial balance and income statement tie into the balance sheet.
It is meant for accounting students working homework problems, small-business owners checking a balance sheet, and anyone reconciling a set of books. Every transaction keeps the equation in balance, so if your own figures do not agree with the result, something has been posted to the wrong account or missed.
With the default inputs, the missing value is $155,000.00. Change any value above to recalculate instantly.
How to use the accounting equation calculator
- 1Choose which value you want to solve for.
- 2Enter the two figures you know from the balance sheet.
- 3To build equity from its parts, switch on the expanded equation and enter capital, revenue, expenses and dividends.
- 4Read the missing value, then check the debt ratio and debt-to-equity ratio.
- 5If your books show a different figure, look for a mis-posted or missing entry.
Formula and method
The basic accounting equation says everything a business owns (assets) is financed either by creditors (liabilities) or by its owners (equity). Rearranging gives E = A − L and L = A − E, which is how the missing value is found.
The expanded equation replaces equity with its components: contributed capital (or opening equity), plus revenue, minus expenses, minus dividends or owner drawings. Revenue minus expenses is net income for the period, so equity grows when the business is profitable and shrinks when it pays owners. The debt ratio is L ÷ A and debt-to-equity is L ÷ E.
- A
- Total assets
- L
- Total liabilities
- E
- Owner’s (or shareholders’) equity
- C
- Contributed capital or opening equity
- R
- Revenue for the period
- X
- Expenses for the period
- D
- Dividends or owner drawings
Worked examples
Find equity: $250,000 assets, $95,000 liabilities
Equity is $250,000 − $95,000 = $155,000. Liabilities fund 95,000 ÷ 250,000 = 38% of assets, and debt-to-equity is 95,000 ÷ 155,000 ≈ 0.61.
Find assets with the expanded equation
Equity is $60,000 + $85,000 − $52,000 − $8,000 = $85,000 (net income of $33,000 less $8,000 drawings added to capital). Assets must equal $40,000 + $85,000 = $125,000, so the debt ratio is 32%.
Find liabilities from assets and equity
Liabilities are $480,000 − $300,000 = $180,000. That is 37.5% of assets and a debt-to-equity ratio of 0.6.
Frequently asked questions
What is the accounting equation?+
Assets = Liabilities + Equity. It states that every resource a business controls is funded either by money owed to others or by the owners’ stake. Double-entry bookkeeping keeps both sides equal after every transaction.
What is the expanded accounting equation?+
It breaks equity into its drivers: Assets = Liabilities + Contributed capital + Revenue − Expenses − Dividends (or drawings for a sole proprietor). It shows how profit and distributions move equity between balance sheets.
Can owner’s equity be negative?+
Yes. If accumulated losses and distributions exceed the capital invested, liabilities are larger than assets and equity is negative. It is a warning sign of balance-sheet insolvency, though some healthy companies show it after large buybacks.
Does every transaction keep the equation balanced?+
Yes. Buying equipment with cash swaps one asset for another; borrowing raises assets and liabilities equally; earning revenue raises assets and equity. If your books do not balance, an entry is missing or posted to one side only.
What is a good debt-to-equity ratio?+
It depends on the industry. Many non-financial companies run between about 0.5 and 1.5; utilities and banks carry much more debt, while software firms often carry very little. Compare against peers rather than a single rule.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.