Using the accounting equation with a classified balance sheet is a straightforward process. First, you have to identify and enter your assets properly, assigning them to the correct categories. These liabilities are noncurrent, but the category is often defined as “long-term” in the balance sheet.

Below liabilities on the balance sheet is equity, or the amount owed to the owners of the company. Since they own the company, this amount is intuitively based on the accounting equation—whatever assets are left over aft