Accounting Equation Paper

Accounting Equation Paper Nathan Dukes ACC/300 5/21/2012 The basic method of explanation par is as follows: Assets = Liabilities + stockholders Equity. Liabilities ar a conjunctions legal debts or obligations that arise from legal proceeding or from stage business operations. Stockholders equity is majuscule received from investors in exchange for stock, retained earnings and donated capital. These twain portions of the rest stay sheet added together make up the partys assets, which represent ownership of value that can be converted into cash. The write up equation, also known as the counterweight sheet equation, is how double-entry bookkeeping is established. This means that the method of accounting equation intrinsic ALWAYS poise. Every transaction has a dual shopping mall on the accounting equation. If the accounting equation does not correspondence then a companys pecuniary reports consequence not make sense and pull up post enabl e the accounting department to keep track of financial transactions. In station to be able to read or understand a balance sheet, it is essential to understand the accounting equation and what it consists of. The accounting equation and the balance sheet ar related in that the components of the balance sheet are make by victimization the accounting equation. The components of the accounting equation are what make up the information in the balance sheet. When a transaction occurs, the entireness assets of the business may change just now the equation go forth remain in balance. The equation serves as the basis for the balance sheet (QuickMBA.com). The balance that was mentioned in a higher place is always maintained because separately business transaction that is make effect at least two of these components. For example, if a company borrows property from the bank, the companys assets will increase entirely the companys liabilities will also increase by the same exact a mount. The borrowed money becomes an asset (! company owns) but it does fork over to be repaid and therefore is a liability (company owes). This would be the...If you motive to get a broad essay, order it on our website: OrderEssay.net

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