Assets = Liabilities + Equity
The accounting equation is the foundation of double-entry bookkeeping. Every transaction must keep this equation in balance. Assets are what a company owns, liabilities are what it owes, and equity represents the owners' claim on assets.
Example: Starting a Business
You invest $50,000 cash into your new business.
Assets (+$50,000 Cash) = Liabilities ($0) + Equity (+$50,000 Owner's Capital)
The equation balances: $50,000 = $0 + $50,000
Every transaction affects at least two accounts. This is why it's called double-entry bookkeeping.