The first thing I learned in my accounting class was the equation, assets= liabilities + equity. "Sounds easy to me," I thought to myself. Yet, there would be times where I came across a transaction that would leave the equation out of balance. No matter how you could possibly try to justify what you had done to get your answer, if the equation was out of balance... YOU did something wrong. Because that equation, must always remain in balance.
So, what was right you ask? That's the thing. It changed every time. Sometimes you would classify something as an asset when it was a liability, other times you would learn there's another way GAAP requires you to record it. It varied each transaction, but each time one thing remained constant: one small change would put everything in balance.
That's when it clicked to me. This accounting equation, assets = liabilities + equity, was useful regardless if you were an accountant or not. Because some may refer to it as the "language of business", but I think accounting is language of life
Like our lives, this equation must always remain in balance. Each transaction, like each interaction, will determine how things will balance. Naturally. And when it feels like something is out of balance in our lives, we must ask ourselves not what to add or takeaway, but what to redefine. For that one small change, can mean everything.
See, it's how you analyze each transaction that determines your reality.