The accounting equation is the foundation on which businesses categorize their accounts. Individuals, including you, can also use the accounting equation to categorize accounts. For example, a person purchases a car on credit. The purchase of the car has impacts on both the asset side and the liabilities side of the accounting equation. On the asset side, the purchase increases the person’s assets. On the liability side, the use of credit increases the person’s liabilities.
Identify the accounting equation and give a personal example of how you can apply this in your daily life.
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