Accounting · Odoo glossary
Accounting Equation
The accounting equation connects assets, liabilities, and equity: Assets = Liabilities + Equity.
Definition
In general ERP practice
The accounting equation expresses the relationship between a company’s resources and the claims against them: Assets = Liabilities + Equity. Equity is the residual interest after liabilities are deducted from assets.
A transaction may change several accounts without changing total assets. Receiving a loan increases assets and liabilities; collecting an existing receivable exchanges one asset for another without creating new revenue.
In Odoo
Odoo uses double-entry journal entries to record financial movements. Posted invoices and bills generate entries from configured accounts and taxes; reporting aggregates ledger data into financial statements.
Correct setup and opening balances let users process routine documents without recalculating the balance sheet. Balanced entries do not prove correct classification, completeness, or revenue recognition.
Official Odoo documentation
The Odoo-specific explanation above is based on the documentation for Odoo 19. Features and workflows can differ in other versions.
Related glossary terms
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