Final answer:
The Accounting Equation, which states that Assets = Liabilities + Equity, is the foundation upon which accounting is built. It facilitates the double-entry bookkeeping system and maintains balance for each financial transaction. The national saving and investment identity is vital in economics, requiring a balance in the financial capital market's supply and demand.
Step-by-step explanation:
The equation upon which accounting is built is the Accounting Equation, also known as the Balance Sheet Equation. It states that Assets = Liabilities + Equity. This fundamental equation reflects that all assets are either financed by borrowing money (liabilities) or by the company's owners' contributions (equity). It's important to understand the elements of the accounting equation as they provide the foundation for the double-entry bookkeeping system. Each financial transaction recorded by a company impacts at least two of the company's accounts, maintaining the accounting equation in balance.
When approaching problems related to the national saving and investment identity, another pivotal concept in economics, it's crucial to consider supply and demand within the financial capital market. This involves understanding how savings (supply) and investments (demand) are related and ensures that the identity, which plays a critical role in national economics, holds true. Keeping the balance between the supply side and demand side is essential when working on calculations revolving around these national economic principles.