article clerk
202 Points
Joined March 2012
We have been asked the question by our college in this manner only.This is one of the questions asked in our assignment & we are confused about the answer.Our one view is,
You can have assets and no liabilities in which case assets equals owners equity. For instance if the company had cash, from operating the business, or and IPO, and bought an asset for cash there would be no liability incurred.
Other view is,
Because the only way you can obtain an asset is by offsetting it with a liability. When you buy a car you obtain an asset, but you offset it by having a liability, which may be a cash payment or a loan taken out... It all makes perfect sense.