THE ACCOUNTING EQUATION & INTRODUCTION TO THE BOOKS OF ACCOUNT.
Hey Guys, Happy Eid-El-Kabir Celebration. Today is a new day
and we are going to have fun on the above mentioned Topics.
THE
ACCOUNTING EQUATION.
The Accounting Equation is the Fundamental Equation of the
entire financial account. In order words, it the beginning of all equations in
account as a whole, the Foundation.
1. Assets are properties of a business. They
are things owned by a business and are expected to be of Future Benefit. For
example, Motor Van, Furniture & Fitting, Stock etc.
2. Capital is the Total amount invested by
the owner of a business. It is the Net Worth of a business.
3. Liabilities are amounts of money owed by a
business to outsiders. For example, Bank Overdraft, Creditors etc.
Therefore, the account equation is:
Assets=
Capital + Liabilities
