1. Financial Zero

This is the first post in a revolutionary blog that will reveal the true meaning of the Accounting Equation, the simple mathematical expression that serves as the cornerstone of our financial world. What is revolutionary about this blog is that it will show that, contrary to everything you may have been taught elsewhere, the only thing that the Accounting Equation expresses is that:

In double-entry bookkeeping, where each transaction is recorded as both a withdrawal from some account and a deposit to some other account, the balance of all the accounts must remain zero, the total withdrawals always canceling out the total deposits.

This, of course, is far different from the accounting equation found in most text books, where the accounting equation is expressed as follows:

Assets = Liabilities + Owner’s Equity

In following posts, this blog will demonstrate, incontrovertibly, the following:

1. The textbook version of the equation is mathematically invalid.

2. The equation only tells us that the balance of all accounts is zero.

3. Correcting the equation makes it more useful.

For further information, see chapter three of The Tao of Financial Information.