UNIT 1 THE ACCOUNTING EQUATION

UNIT1 ASSETSTHEACCOUNTINGEQUATIONLIABILITIES= OWNER' a ACCOUNT- a ' theprimaryaccountfortrackingtheinvestede quityofa 'SEQUITYis thenetworthofa +--+ +OWNER' +rewritingtheaccountingequationit shouldbenotedthatAssetsareontheopposites ideoftheequationfromLiabilitiesandOwner' :Thefollowingexamplewillshowonlythecurre nttransactioninformationineachT +OwnerIS ,asophomoreatStateUniversity,startedtheQ uickCleanLaundryServicewitha$ ,paid$ ~ ,purchasedLaundrySuppliesfor$ , ,purchased$48ofLaundryEquipmentpaying$ !.l:i, $ 'SEQUITYSTORAGEACCOUNTSWITHDRAWALSisa storageaccountusedtorecordperiodicdecrea sesinOwner' decreaseinOwner'sEquitycausedbya decreaseinAssets(usuallyCash)oranincreas einLiabilities(SalariesPayable,AccountsP ayable,etc.) ,Advertising, 'sEquitycausedbyanincreaseinAssets(usual lyCashorAccountsReceivable) ,InterestIncome, definitionsin PartVI to the +-= ~.Expense,Revenue,andWithdrawalsaretempo rarystorageaccountsusedtotrackchangesinO wner'sEquityandtheirpositiveornormalbala nceis consistentwiththeeventualchangetobemadei nOwner' ,expensesandwithdrawalsaredebitsbecauset heywilleventuallylowerOwner'sEquity,andR evenueisa creditbecauseit willeventuallyincreaseOwner' ,Expense,andWithdrawalsmayalsobethoughto faschangesinAssetsand/orLiabilitieswhich causeOwner' +OWner' Darinwithdrew$20 for Cashcollectedfor Laundryservicesperformedduringthe monthamountedto $140.

The DOUBLE ENTRY system of debits and credits facilitates the increasing and decreasing of the amounts stored in the Balance Sheet Accounts. The above schematic summarizes part of the system. After + OWNER'S EQUITY R-1 -rewriting the accounting equation it should be noted that Assets are on the opposite side of the equation from

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  Accounting, Entry, Double, Double entry

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