Balance equation. What is the primary accounting equation that describes the balance sheet of a
not-for-profit, business-oriented health care entity?
Solution
The primary accounting equation that describes the balance sheet of a not-for-profit, business-
oriented health care entity is given below:
Assets = Liabilities + Net Assets (answer)
where Net Assets = Total Assets - Total Liabilities
Total assets of a not-for-profit organization are segregated into 3 major categories:
Unrestricted net assets, temporarily and permanently restricted net assets.
Liabilities include both current and long term liabilities.