[1][2] Where an accounting identity applies, any deviation from numerical equality signifies an error in formulation, calculation or measurement.
Balance sheets are commonly presented as two parallel columns, each summing to the same total, with the assets on the left, and liabilities and owners' equity on the right.
The sale of product, for example, would record both a receipt of cash (or the creation of a trade receivable in the case of an extension of credit to the buyer) and a reduction in the inventory of goods for sale; the receipt of cash or a trade receivable is an addition to revenue, and the reduction in goods inventory is an addition to expense.
"[7] The basic equation for gross domestic product is also an identity, and is sometimes referred to as the National Income Identity:[8] This identity holds because investment refers to the sum of intended and unintended investment, the latter being unintended accumulations of inventories; unintended inventory accumulation necessarily equals output produced (GDP) minus intended uses of that output—consumption, intended investment in machinery, inventories, etc., government spending, and net exports.
A key identity that is used in explaining the multiple expansion of the money supply is: Here the liabilities include deposits of customers, against which reserves often must be held.