accounting equation basic examples
TRANSCRIPT
ACCOUNTING EQUATION EXAMPLES
DRAKE STARTED BUSINESS & LODGED $5,000 INTO HIS BUSINESS BANK ACCOUNT THAT HE JUST OPENED
ØASSETS = OWNER’S EQUITY + LIABILITIESØ$5,000 = $5,000 + $0
ASSETS
CASH AT BANK $5,000
OWNER’S EQUITY
$5,000
(ALSO REFERRED TO AS CAPITAL – OWNER’S
CLAIMS ON THE ASSETS)
LIABILITIES
$0
IF DRAKE THEN PURCHASED A COMPUTER FOR HIS BUSINESS FOR $3,000 AND PAYS FOR IT BY CHEQUE
• ASSETS = OWNER’S EQUITY + LIABILITIES• $5,000 = $5,000 + $0
ASSETS
COMPUTER $3,000BANK $2,000TOTAL ASSETS $5,000
(BANK BALANCE OF $5,000 IS REDUCED BY $3,000 CHEQUE)
OWNER’S EQUITY
$5,000
(ALSO REFERRED TO AS CAPITAL –
OWNER’S CLAIMS ON THE ASSETS)
LIABILITIES
$0
IF DRAKE THEN BUYS SOME STOCK FOR $500 ON CREDIT FROM A SUPPLIER
• ASSETS = OWNER’S EQUITY + LIABILITIES• $5,500 = $5,000 + $500
ASSETS
COMPUTER $3,000BANK $2,000STOCK $500TOTAL ASSETS $5,500
OWNER’S EQUITY
$5,000
(ALSO REFERRED TO AS CAPITAL –
OWNER’S CLAIMS ON THE ASSETS)
LIABILITIES
TRADE PAYABLES $500
(AMOUNTS OWING TO SUPPLIER)
IF DRAKE SOLD GOODS WHICH HAD COST HIM $100, TO A CUSTOMER ON CREDIT FOR $100
• ASSETS = OWNER’S EQUITY + LIABILITIES• $5,500 = $5,000 + $500
ASSETS
COMPUTER $3,000STOCK($500-$100) $400DEBTORS $100BANK $2,000TOTAL ASSETS $5,500
(DEBTORS ALSO REFERRED TO AS ACCOUNTS RECEIVABLES)
OWNER’S EQUITY
$5,000
(ALSO REFERRED TO AS CAPITAL –
OWNER’S CLAIMS ON THE ASSETS)
LIABILITIES
TRADE PAYABLES $500
(AMOUNTS OWING TO SUPPLIER)
IF DRAKE SOLD GOODS WHICH HAD COST $50 TO A CUSTOMER FOR $50 AND THAT CUSTOMER
PAYS IMMEDIATELY• ASSETS = OWNER’S EQUITY + LIABILITIES• $5,500 = $5,000 + $500
ASSETS
COMPUTER $3,000STOCK($400-$50) $350DEBTORS $100BANK (+$50) $2,050TOTAL ASSETS $5,500
(DEBTORS ALSO REFERRED TO AS ACCOUNTS RECEIVABLES)
OWNER’S EQUITY
$5,000
(ALSO REFERRED TO AS CAPITAL – OWNER’S
CLAIMS ON THE ASSETS)
LIABILITIES
TRADE PAYABLES $500
(AMOUNTS OWING TO SUPPLIER)
IF DRAKE PAID $200 TO HIS SUPPLIER BY CHEQUE
• ASSETS = OWNER’S EQUITY + LIABILITIES• $5,300 = $5,000 + $300
ASSETS
COMPUTER $3,000STOCK $350DEBTORS $100BANK (-$200) $1,850TOTAL ASSETS $5,300
(BANK – BANK BALANCE OF $2,050 LESS $200 PAID TO SUPPLIER)
OWNER’S EQUITY
$5,000
(ALSO REFERRED TO AS CAPITAL –
OWNER’S CLAIMS ON THE ASSETS)
LIABILITIES
TRADE PAYABLES $300
(AMOUNTS OWING TO SUPPLIER HAVE BEEN
REDUCED BY THE $200 PAID BY DRAKE)
($500 LESS $200 = $300)
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