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Assets = Liabilities + Equity
Scenario: You run a lemonade stand and currently have $500 in assets and $100 in liabilities. Calculate the equity.
Assets = $500
Liabilities = $100
Equity = $500 - $100
Equity = $400
If we sold off all our assets and evened-up on our liabilities... we'd be left with $400 in equity!
Your assets must always equal your liabilities + equity! If they don't... you've done something wrong!
