Accounting Equation Explained the Easiest Way.pdf
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The document explains the accounting equation, which balances a company's assets with its liabilities and equity. It states that the accounting equation is Assets = Liabilities + Equity, where assets are what the company owns, liabilities are what it owes, and equity is the owner's claim on the assets. Two brief examples are given to demonstrate changes to the accounting equation when a company borrows $10 from the bank and the owner invests a $15 computer.
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- 1. THE ACCOUNTING EQUATION EXPLAINED THE EASIEST WAY A L E = +
- 2. A L E = + Assets Liabilities Equity What the company owns What the company owes The Accounting Equation
- 3. = Assets + Equity Liabilities Cash Receivables Inventory Fixed assets Investments The Accounting Equation
- 4. = Assets + Equity Liabilities Cash Receivables Inventory Fixed assets Investments A/P Loans Notes Mortgage Accruals The Accounting Equation
- 5. = Assets + Equity Liabilities Cash Receivables Inventory Fixed assets Investments A/P Loans Notes Mortgage Accruals Stockholders' Owner's' Partners' Retained earnings The Accounting Equation
- 6. = Assets + Equity Liabilities Cash Receivables Inventory Fixed assets Investments A/P Loans Notes Mortgage Acrruals Stockholders' Owner's' Partners' Retained earnings Borrowed $10 from bank. 10 10
- 7. = Assets + Equity Liabilities Cash Receivables Inventory Fixed assets Investments A/P Loans Notes Mortgage Acrruals Stockholders' Owner's' Partners' Retained earnings The owner invested a computer worth $15. 15 15
- 8. = Assets + Equity Liabilities Cash Receivables Inventory Fixed assets Investments A/P Loans Notes Mortgage Acrruals Stockholders' Owner's' Partners' Retained earnings The company purchased on credit an inventory amounting to $5 from its suppliers. 5 5