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Assets = Liabilities + Equity is the most fundamental formula of financial position of a company and basic accounting equation of company financial position. It arranges accounts in three fundamental groups which should always stay at par with each other. The equation serves to direct the double-entry bookkeeping system by making sure that all transactions have an impact on the accounting records to maintain a balance. As an example, cash acquisition of inventory causes reduction or increase in one asset and simultaneous increase or reduction in another, all totals remain constant. The knowledge of the equation is useful in enabling the users to comprehend business operations, monitor financial performance, and create proper balance sheets that will represent the reality of resource ownership and liabilities.