THE ACCOUNTING EQUATION & INTRODUCTION TO
THE BOOKS OF ACCOUNT.
Hey Guys, today is a new
day and we are going to have fun on the above mentioned Topics.
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
Example 1:
Assets
|
Liabilities
|
Capital
|
a) 550,000
|
?
|
200,000
|
b) ?
|
170,000
|
80,000
|
c) 260,000
|
60,000
|
?
|
d) 140,000
|
?
|
100,000
|
a) Assets= Capital + Liabilities
550,000= 200,000 + L
