Introduction:
The accounting equation is the fundamental concept of accounting which states that assets must always equal liabilities plus equity. This equation is the foundation of financial accounting, and it is essential for businesses to follow it under all circumstances.

Illustration 1:
Suppose a company has assets worth $50,000, liabilities worth $20,000, and equity worth $30,000. To verify the accounting equation, we can use the following formula:

Assets = Liabilities + Equity
$50,000 = $20,000 + $30,000

This equation holds true, and it shows that the company's assets are financed by its liabilities and equity.

Illustration 2:
If a company purchases a new asset worth $5,000 by taking a loan of $3,000, the accounting equation will be as follows:

Assets = Liabilities + Equity
($50,000 + $5,000) = ($20,000 + $3,000) + ($30,000 + $2,000)

This equation also holds true, and it shows that the company's assets have increased by $5,000, and it is financed by an increase in liabilities and equity.

Conclusion:
The accounting equation is a fundamental concept in accounting, and it holds true under all circumstances. It is essential for businesses to follow this equation to maintain the accuracy and integrity of their financial statements. The above-mentioned illustrations demonstrate that the accounting equation holds good, and it is applicable to all businesses.