Assets equal claims on assets
An asset is an economic resource the entity controls. Liabilities are obligations to others. Equity is the residual interest after liabilities are deducted from assets. The accounting equation is assets = liabilities + equity. It describes financing claims, not a promise that every asset can be sold for its recorded amount.
Morrow's owner contributes $20,000 cash. Assets rise $20,000 and contributed equity rises $20,000. The business then borrows $10,000: cash and liabilities each rise $10,000. Borrowing is not revenue because the lender has a claim to repayment. The business buys equipment for $12,000 cash: cash falls and equipment rises, leaving total assets unchanged at that moment.
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After these transactions, cash is $18,000 and equipment is $12,000. Total assets are $30,000. Debt is $10,000 and equity is $20,000. The equation balances. The owner's ownership percentage has not fallen just because debt increased; debt and ownership are different contractual claims.
Revenue generally increases equity through earnings. Expenses generally reduce it. Dividends reduce equity without being an income-statement expense. Equity can be negative when accumulated losses or distributions exceed contributed capital and other equity balances; the equation still holds.
Do not confuse book equity with market capitalization. Book equity reflects recognized assets and obligations under accounting rules. Market capitalization reflects the market price of outstanding equity shares. Unrecognized future opportunities, risk and expected returns create a gap between them.