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Accounting Equation

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Thapelo Mkhize
Thapelo Mkhize

This document discusses the accounting equation and its components. The accounting equation states that assets are equal to liabilities plus owners' equity. It introduces the six key elements of accounting: assets, liabilities, owners' equity, revenues, expenses, and net income. The objectives are to use the accounting equation to present these elements and how they change with increases and decreases, and to analyze how business transactions affect the accounting equation. Examples of classifying items and analyzing transactions are provided.

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Assets, Liabilities, Owners equity, Revenues, Expenses and Net income. Six elements of accounting: Point 3 Accounting Equation
Assets Liabilities Owners equity Assets=Liabilities +Owners Equity Double entry Three basic elements of accounting Introduction
Study objectives Use the accounting equation to present accounting elements and their increases and decreases. Analyze the effects of business transactions on the accounting equation. 4 Accounting Equation
鐚 1 鐚 The basic Equation The accounting equation is the same for all economic entities.
The expanded Accounting Equation
Example 鐚 Classify the following items as assets, liabilities, or Owner's equity: (1) cash, (2) service revenue, (3) drawings, (4) accounts receivable, (5) accounts payable, (6) salaries expense.
Transaction identification process: 鐚 2 鐚 Transaction Analysis
Transaction (1): Investment by Owner. On September 1, 2015, Marc Douket invests $15,000 cash in the business .
Transaction (2): Purchase of Equipment for Cash. Softbyte purchases computer equipment for $7,000 cash.
Transaction (3): Purchase of Supplies on Credit. Softbyte purchases from the Tuch Supply Company $1,600 of computer paper and other supplies on Credit.
Summarizing 1. Each transaction must have effects on the three components (assets, liabilities, and Owner's equity) of the accounting equation 2. The two sides of the equation must always be equal.

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Accounting Equation

  • 1. Assets, Liabilities, Owners equity, Revenues, Expenses and Net income. Six elements of accounting: Point 3 Accounting Equation
  • 2. Assets Liabilities Owners equity Assets=Liabilities +Owners Equity Double entry Three basic elements of accounting Introduction
  • 3. Study objectives Use the accounting equation to present accounting elements and their increases and decreases. Analyze the effects of business transactions on the accounting equation. 4 Accounting Equation
  • 4. 鐚 1 鐚 The basic Equation The accounting equation is the same for all economic entities.
  • 6. Example 鐚 Classify the following items as assets, liabilities, or Owner's equity: (1) cash, (2) service revenue, (3) drawings, (4) accounts receivable, (5) accounts payable, (6) salaries expense.
  • 7. Transaction identification process: 鐚 2 鐚 Transaction Analysis
  • 8. Transaction (1): Investment by Owner. On September 1, 2015, Marc Douket invests $15,000 cash in the business .
  • 9. Transaction (2): Purchase of Equipment for Cash. Softbyte purchases computer equipment for $7,000 cash.
  • 10. Transaction (3): Purchase of Supplies on Credit. Softbyte purchases from the Tuch Supply Company $1,600 of computer paper and other supplies on Credit.
  • 11. Summarizing 1. Each transaction must have effects on the three components (assets, liabilities, and Owner's equity) of the accounting equation 2. The two sides of the equation must always be equal.