Transcription of UNIT 1 THE ACCOUNTING EQUATION
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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.
accounting equation has been rewritten to better explain debits and credits. ASSETS = LIABILITIES DR. ICR. DR. l CR. + - - + 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 -
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