Saturday, April 7, 2012

The accounting equation

As we have seen, we find the value of the owner's interest (known as capital or equity) by deducting liabilities from assets. This equation can be represented in a number of different ways (for simplicity, we shall assume
that assets exceed liabilities):

Assets - Liabilities = Capital


Non-current Assets + (Current Assets) - (Current Liabilities
+ Non-current Liabilities) = Capital


(Non-current Assets + Current Assets - Current Liabilities)
- Non-current Liabilities= Capital


accounting equationThis final version of the accounting equation is the one usually followed by accountants in the UK when preparing the financial summary of assets, liabilities and capital, which is known as a balance sheet.

Posted By:
Elmer Tamayo
author Elmer Tamayo is the author of myaccountinginfo.net who took-up his degree of "BS in Accountancy" major in accounting. A Web designer and blogger, His passion is Reading books, searching new tech update on the world wide web. Read More...
Join him on Google+ | Facebook | Twitter


Labels:

Related Post