Acc/300

Accounting Equation Paper

Evalina Marty

ACC/300

01/12/2014

Shellie Joyner

Accounting Equation Paper

In the world of finance, it is important to know what accounting equations are and balance sheet. How and what they used and how they relate to each other. There are so many components when it comes to accounting, and certain techniques will help you obtain in getting the correct total.

Accounting equation are equations that represent the link between assets, liabilities and owner equity of a company (a=c + l). It is the formula of the double- bookkeeping system. The total debits should equal the total credits for each activity. It’s important that the equation balances because everything, the company owns, has to pay for something. They have to be able to purchase liability or owner's capital. Examples of assets could be merchandise. Liabilities are loan's and account payables. Last owner’s equity are contributed capital and retained earnings. Balance sheets record proof of the financial balances of a company. Balance sheet are referred to the snapshots of how the company is doing. A balance sheet describes two sides of the business. On one side of the balance sheet, you can identify the assets. Theses assets are proof of what the company owns. Assets values are tracked and provide the history of what their value was when it was first purchased. Sources of assets found on the other side of a balance sheet gives details where they purchased. The relationship between the two and, how they work together, is, balance sheet will track, and then you subtract to see if the total balances out. Accounting equations are adding and equally total assets, which this route the simpler. Example: clothing business reports 2.5 million in total assets. Total liabilities are 1.0 million and capital invested 1.5 million. Equations 2.5 assets = 1.0 liabilities +1.5 owners equity they equal out.

Companies need to know what their financial snapshot look like and need...