1. Basic Concepts of GENERAL Accounting
MINAKSHI SINGH

2. The Basic Accounting Equation
Financial accounting is based upon the accounting equation.
Assets = Liabilities + Owners' Equity
This is a mathematical equation which must balance.
If assets total $300 and liabilities total $200, then owners' equity must be $100.

3. The Basic Accounting Equation
The balance sheet is an expanded expression of the accounting equation.

4. The Basic Accounting Equation

5. Assets Assets are valuable resources that are owned by a firm.
They represent probable future economic benefits and arise as the result of past transactions or events.

6. Liabilities Liabilities are present obligations of the firm.
They are probable future sacrifices of economic benefits which arise as the result of past transactions or events.

7. Owners' Equity
Owners' equity represents the owners' residual interest in the assets of the business.
Residual interest is another name for owners' equity.

8. Owners' Equity
Owners may make a direct investment in the business or operate at a profit and leave the profit in the business.

9. Owners’ Equity = Assets – Liabilities
Yet another name for owners' equity is net assets.
Indicates that owners' equity results when liabilities are subtracted from assets.
Owners’ Equity = Assets – Liabilities

10. The Basic Accounting Equation
Both liabilities and owners' equity represent claims on the assets of a business.

11. The Basic Accounting Equation
Liabilities are claims by people external to the business.