Balance Sheet Equation

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The Balance Sheet Equation, Accounting Equation, Equity Equation, Balansvergelijking, Balansvergelijkingstelling, Eigendomsvergelijking or Eigendomsvergelijking, calculates the equity on the balance sheet.

Several of many ways to formulate this equation:

Equity = Assets -/- liabilities
Equity = Total assets -/- Total liabilities

Eigen vermogen = Bezittingen -/- schulden
Eigen vermogen = Alle bezittingen -/- All schulden

Does equity include private withdrawals?

So far, I used to include Private withdrawals (Onttrekking privé) in the equity equation. But that's kinda weird:

  • This is not part of the wealth of a business - Au contrary: It saps away the wealth
  • Private withdrawals are not transported to a new year. Meaning that the closing balance of the previous year and the opening balance of the new year, will differ dramatically. This would require private withdrawals to be included for ever - That doesn't make sense.

Conclusion (2023.03.03): Private withdrawals should not be included in the Balance Sheet Equation

See also