Technical definition
The identity Assets = Liabilities + Equity, which expresses how an entity's resources are financed.
How it works
Every recognized transaction changes at least two elements while preserving equality. Borrowing increases an asset and a liability; earning revenue increases an asset and equity; paying an expense decreases an asset and equity.
Everyday example
Assets of $90,000 and liabilities of $25,000 imply equity of $65,000.
Common pitfall
A balanced equation proves arithmetic consistency, not that every transaction was recorded correctly.