Accounting equation is the mathematical formula that used in accounting to ensure the balancing of the accounts. It is represented by: Assets=Liabilities and Equities. Re arranging the equation, equity will be computed by deducting the liabilities with the assets. Thus, in the problem , total assets is equal to the investment of 25,000 and the cash borrowed equal to 15,000 totaling 40,000. Liabilities on the other hand is equal to the payable borrowed in the bank equal to 15,000. Thus, the equity is equal to 15,000 computed as follows: 40,000-15,000=25,000