Accounting Equation.

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Presentation transcript:

Accounting Equation

Resources supplied by the owner (Capital) Resources supplied by others (Liabilities) Resources in the business (Assets)

Capital + Liabilities Assets

Assets = Capital + Liabilities

Assets Motor Vehicle Cash Bank $ Office Equipment Buildings Stock Debtor

$ $ Bank Overdraft $ Bank Loan Liabilities Accruals Creditor

Every transaction affects two items.

Owners put $10,000 into the business.

Assets = Capital + Liabilities

Purchase of goods from A Chan on credit.

Assets = Capital + Liabilities

Payment to A Chan in cash.

Assets = Capital + Liabilities  

Owner took goods from the business for his own use.

Assets = Capital + Liabilities  

Sale of goods to B Wong on credit.

Assets = Capital + Liabilities Debtors  Stock

Owner paid A Chan from his private money.

Assets = Capital + Liabilities  +

Assets = Capital + Liabilities      + + 