Escolar Documentos
Profissional Documentos
Cultura Documentos
ACCOUNTING EQUATION
Example
Hamidah (individual) Separate accounting entity (record of personal transaction)
Accounting equation
Accounting equation is an equality that must be prepared at any point of time in accounting period. Basic accounting equation:
ASSET = EQUITIES The equation shows the resources owned by the business And the claims against these resources.
Current Assets
Assets that can be converted into Cash within 1 year Example : stock, debtor, cash in hand
Current liabilities
Debts which are not expected to be paid within a year Example : Bank loans
Debts which are expected to be Paid within a year Example : Creditors, accrued expenses
Capital
Drawing
Revenue
Expenses
THUS..
ACCOUNTING EQUATION
Owners equity = capital drawing + revenue - expenses
OR
ASSETS + EXPENSES + DRAWING = LIABILITY + CAPITAL + REVENUE
LCR (Credit balance in nature) AED (Debit balance in nature) (DOUBLE ENTRY SYSTEM)
INCREASES (+)
OWNERS EQUITY
Revenue received
Expenses incurred
Fatin starts business with RM 30,000 cash from personal savings and RM 20,000 cash from a bank loan The business OWNS the following: Asset CASH The business OWES the following: Owners equity CAPITAL Liabilities LOAN FROM BANK TOTAL
EXAMPLE
RM 50,000
RM 30,000
RM 20,000 RM 50,000
OR
ASSETS RM 50,000 LIABILITIES RM 20,000 OWNERS EQUITY RM 30,000
Seller