The double entry bookkeeping and accounting equation has been very important because it provides the foundation of the double entry book keeping system that allows those records to be accurate. It enables businesses to know how they are financed using either liabilities (debts) or equity (owner’s investment). Overall, businesses use the equation Assets = Liabilities + Owner’s Equity to detect errors, prepare the correct balance sheets, and determining Financial Health. Additionally, it offers a clear sense of what a company possesses compared to what it gives out for that which is very essential when making decisions and when doing financial analysis.

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