Accounting Equation

BBA BBA-BI Financial Accounting Financial Accounting I FIRST SEMESTER Second Semester

Accounting Equation,Financial Accounting I,BBA first semester,BBA-BI second semester

Accounting Equation:

The accounting equation displays that all assets are either financed by borrowing money or paying with the money of the company’s shareholders. Thus, the accounting equation is: Assets = Liabilities +Shareholder Equity. The balance sheet is a complex display of this equation, showing that the total assets of a company are equal to the total of liabilities and shareholder equity. Any purchase or sale by an accounting equity has an equal effect on both sides of the equation, or offsetting effects on the same side of the equation. The accounting equation is also written as Liabilities = Assets – Shareholder Equity and Shareholder Equity = Assets – Liabilities.

Example:

                                                    Accounting Equation for the month of march

                                                     Expert Counselling Service Incorporation

Assets = Liabilities and Owners Equity
Date Cash A/R Supplies Equipment     A/P N/P Capital Stock R/E
2-Mar 40000               40000  
7-Mar 15000             15000    
bal 55000             15000 40000  
12-Mar     700       700      
bal 55000   700       700 15000 40000  
19-Mar   4000               4000
bal 55000 4000 700       700 15000 40000 4000
20-Mar (1,300)                 (1300)
bal 53,700 4000 700       700 15000 40000 2700
22-Mar 1000 (1000)                
bal 54,700 3000 700       700 15000 40000 2700
26-Mar 2800                 2800
bal 57,500 3000 700       700 15000 40000 5500
29-Mar (8000)     8000            
bal 49,500 3000 700 8000     700 15000 40000 5500
30-Mar (3300)                 (3300)
bal 46,200 3000 700 8000     700 15000 40000 2200
31-Mar (1400)                 (1400)
  44,800 3000 700 8000     700 15000 40000  800
Total Assets=56500     Total liabilities +O/E=56500
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