Why should assets and liabilities match?

Question

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Hampton 0 Comments

I read that the assets and the liabilities should match and that its called a matching concept. Why should they match and where does the equity goes then?

1 Answer

score 0 · Answer 1 · 2012-12-02T18:10:15+00:00

They will not match unless the the capital is zero which is not possible. The accounting equation is :

Assets= Liabilities + Capital

So unless you have zero capital, the assets and the liabilities will not be the same. You can have zero capital if for example you have contributed $100 when the company began trading and you have accumulated losses of ($100).