A = L + ESome historian might try and tell you the most important equation is Einstein's general relativity equation, E = MC2, but don't believe them. The most important equation is the one in the title.
I'll go into these components a little more in depth in a later post, but for now I'll briefly introduce them. And check out this picture:
A is for assets. They are any resource that may change the value of the business.
L is for liabilities. They are promises or obligations to pay back creditors in money or some other asset. If you started a business and bought the assets with money you borrowed from the bank, that is a liability.
E is for Equity. Some people call it "owner's equity", "stockholders' equity", "capital", "net assets" or some other name. It is a claim of ownership. So if you start a business with your own money, the assets you buy are owned by you.
Assets must always equal liabilities plus equity. If one side increases, then the other side must also increase (or a component of the same side must decrease). Like I said, I'll go into detail in a later post, but for now know A = L + E.
Here are some free resources I found online, that you can check out if you want more on the subject:
http://en.wikipedia.org/wiki/Accounting_equation
http://www.cliffsnotes.com/study_guide/The-Accounting-Equation.topicArticleId-21081,articleId-21003.html
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