1. Equity Relationships and the Balance Sheet

2. What do we know? We know what an expanded ledger is! We know how to show balances of new accounts on income statements. We know the income statement is the second major statement in accounting. WHAT IS THE FIRST? We have to understand equity accounts and how they relate to each other mathematically. Let’s look again at Eve Boa, LLB.

4. Everything is in balance. New equity accounts are there. To make a balance sheet agree, the amounts in the trial balance could be moved to a balance sheet, but large companies would have trouble with this. SO WHAT DO WE DO?

5. We have to come up with some equity calculations. Debits and credits will help us understand the calculations needed. Eve’s beginning capital was $21,878. This is a credit balance. If revenues are greater than expenses, what do we have?

6. Equity Calculations.

7. Equity Calculations What if the Net Income is a Net Loss? Capital can also be a debit balance. How? Then what would we do? What if there are investments?