Accounting Equation Mr. Chan starts a business The owner

He 1) introduces cash into the business, and 2) borrows a bank loan to buy an office building $10, 000 The owner Bank $500, 000

Therefore, the business now has $500, 000 $10, 000 So, the business is now worth = $10,000 + $500, 000 = $510, 000 It means ASSETS of the business amounts to $510, 000. ASSETS: Total resources of the business

Assets = Liabilities + Capital $510, 000 = $500, 000 + $10, 000 Accounting Equation Assets = Liabilities + Capital $510, 000 = $500, 000 + $10, 000 Liabilities: Resources borrowed from the Third Party. Capital: Resources supplied by the owner.

Balance Sheet as at 31 December 2003 ABC Co. Balance Sheet as at 31 December 2003 Assets $510,000 Capital $10,000 Liabilities $500,000 $510,000 $510,000