Question

Why does the accounting equation always have to be in balance?

Answer 1

Accounting equation is the balance sheet equation which states that total of assets is equal to total liabilities plus total equity. Accounting equation should always be balance as in accounting we use double accounting system which mean every transaction recorded would have debits equal to credits. Each transaction would have two effect which would either increase/decrease debit or credit balance. If the accounting equation does not tally then it means there is some error in the accounting of the transactions. Thus, based on double accounting system accounting equation always have to be in balance.