Use the accounting equation
Apply assets = liabilities + owner's equity to check a business position and find an unknown amount.
Cambridge IGCSE Accounting 0452 / (9–1) 0985, 2027–2029 Version 1. These lessons follow the 2027–2029 syllabus only; the separate 2026 syllabus update is not yet mapped. Written practice is self-checked, not an official Cambridge grade. Full timed-paper practice and human subject-teacher review remain pending.
Before you begin
- No previous accounting study is assumed. Keep the business, transaction and accounting period in view, and distinguish a resource, a claim and a performance result.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
Which equation represents the relationship between assets and claims?
What you will learn
- State the accounting equation
- Rearrange it to find a missing amount
- Check whether transactions keep both sides equal
Two sides show the same position
Assets = liabilities + owner's equity. The left side lists resources; the right side shows claims against those resources.
The equation must remain balanced after each complete transaction. A transaction may affect two asset accounts, an asset and a liability, or an asset and equity; trace both effects rather than memorising a single debit or credit rule at this stage.
Solve, then check
If assets are known, equity = assets − liabilities. If a liability is unknown, liabilities = assets − equity. Substitute the result back into the original equation to check it.
A balanced equation does not prove that the records contain no errors: a transaction can be omitted or recorded incorrectly on both sides and still balance.
Pause and explain
Assets are $31,000 and equity is $19,500. Find liabilities.
Worked example
A business has liabilities of $6,200 and owner's equity of $11,800. Calculate assets and check the equation.
Show the worked solution
- Write assets = liabilities + equity.
- Assets = 6,200 + 11,800 = $18,000.
- Check: 18,000 = 6,200 + 11,800.
Answer Assets are $18,000; both sides of the equation equal $18,000.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A business has assets of $9,400 and liabilities of $2,850. Calculate equity and verify the equation.
Give me a hint
Use equity = assets − liabilities, then substitute back.
Compare my reasoning
- Equity = 9,400 − 2,850.
- Equity = $6,550.
- Check: 9,400 = 2,850 + 6,550.
Owner's equity is $6,550; the equation balances at $9,400.
Look for these in your work
- Rearrangement correct
- Calculation correct
- Check shown
A new business receives $12,000 from its owner and then borrows $4,000 from a bank. State assets, liabilities and equity immediately after these transactions, assuming the money remains in cash.
Give me a hint
Classify owner investment separately from borrowing.
Compare my reasoning
- Cash assets total 12,000 + 4,000 = $16,000.
- The bank loan is a $4,000 liability.
- Owner's equity is the owner's $12,000 contribution; check 16,000 = 4,000 + 12,000.
Assets $16,000; liabilities $4,000; owner's equity $12,000. The equation balances, assuming neither amount has been spent.
Look for these in your work
- Cash total correct
- Loan liability correct
- Equity and check correct
A business uses $1,200 cash to buy equipment. Explain the immediate effect on the accounting equation if no other amount changes.
Give me a hint
One asset is exchanged for another asset.
Compare my reasoning
- Cash decreases by $1,200.
- Equipment increases by $1,200.
- Total assets, liabilities and equity are unchanged.
Cash falls by $1,200 and equipment rises by $1,200. Total assets do not change, so liabilities and owner's equity are unchanged and the equation remains balanced.
Look for these in your work
- Both asset changes shown
- Total assets considered
- Equation remains balanced
Common mistakes
- Subtracting when the unknown is assets
- Changing only one side after a transaction
- Assuming a balanced equation proves every entry is correct
What can you explain now?
Liabilities are $3,400 and equity is $7,600. What are assets?
Compare with the explanation
$11,000
Add the two claims: 3,400 + 7,600.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
How can you check a calculated missing balance using the accounting equation?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.