The Foundation of Accounting" The accounting equation is essentially the foundation of accounting. What relationship can you make between the accounting equation and journal entries? What relationship can you make between the accounting equation the financial statements (specifically the income statement, owner's equity statement, and balance sheet)? If you approach this the right way, you can use this forum to prepare for Exam 1. Remember, any use of sources outside of your opinion must be cited using APA formatting (Google "APA format")