1. ACCOUNTING EQUATION

3. Assets = Owner’s Equity + Liabilities
Items of value owned by the business
The funds of a business provided by its owners and the profits entitled to him
Debts owed by a business to external parties such as suppliers

4. Assets = Owner’s Equity + Liabilities
Building
Motor vehicle
Office Equipment
Fixtures
Stock (closing)
Cash in hand
Cash at bank
Capital
Profits
Creditors
Loan from bank
Other creditors
* Explain these terms to students

5. Assets = Owner’s Equity + Liabilities
Every transaction will affect 2 items.
The equation will still balance!

6. Can you link?? Source Documents (originals) Books of Prime Entry
(Journal Entries)
Ledgers
Trial Balance
Adjustments
Reports

7. TRANSACTION THAT AFFECTS BOTH ASSET AND OWNER’S EQUITY
A = OE L
TRANSACTION THAT AFFECTS BOTH ASSET AND LIABILITY
ASSET  LIABILITY 
ASSET  LIABILITY 
TRANSACTION THAT AFFECTS BOTH ASSET AND OWNER’S EQUITY
ASSET  OWNER’S EQUITY 
ASSET  OWNER’S EQUITY 

8. TRANSACTION THAT AFFECTS LIABILITY  LIABILITY 
A = OE L
TRANSACTION THAT AFFECTS
ASSETS ONLY
ASSET  ASSET 
TRANSACTION THAT AFFECTS
LIABILITIES ONLY
LIABILITY  LIABILITY 

9. Examples : A = OE + L a) John began business with cash in hand $5000.
Cash $ Capital $5000
The firm took a bank loan of $8000.
Cash $ Bank Loan $8000
Being purchase of motor vehicle from
ABC Trading for $2000.
Motor Vehicle $ Cash $2000

10. Examples : A = OE + L d) Being payment of $500 to Creditor, Peter.
Cash  $ Creditors  $500
e) Being receipt of $3500 in cheque from a debtor.
Debtors  $ Cash at Bank $3500

11. Examples : A = OE + L f) Being repayment of bank loan for $1500.
Cash  $ Bank Loan  $1500
g) Being purchase of office equipment from
Lee Trading on credit for $780.
Office Equipment $ Creditors$ (Lee Trading)

12. Assets = Owner’s Equity + Liabilities
ACCOUNTING EQUATION
Assets = Owner’s Equity Liabilities

13. IN CLOSING…