[mytailorisrich]

Liabilities (Edit: plus equity) must always equal assets. This is the basic accounting principle.

Double entry enforces this and also ensures that nothing is lost into thin air by requiring that debits and credits match.

So for instance, if you spend money to buy a new laptop that money hasn't disappeared into thin air, it has been used to buy a tangible asset so while your cash has decreased your tangible assets have increased by the same amount (double entry) and your accounts are still balanced.

Or, if you pay a bill then both your liabilities and your assets (double entry) have decreased by the same amount and, again, your accounts are still balanced.

That's how you keep track of this and ensure (well, at least it helps) that your financial situation is accurately recorded.

[kevmarsden]

To be a bit more specific: Assets = Liabilities + Equity

[mikeyouse]

Right. Was going to comment the same. If you sell a product for $100 that only cost you $90 to produce, that $10 isn't a 'liability', it's profit / retained earnings (an equity account).