Lecture 3 Accounting Equation Duality 1 Accounting Equation

Lecture 3 Accounting Equation Duality 1

Accounting Equation Assets - Liabilities = Shareholders Funds (Capital) 2

Application of A/cing Equation Dave has set up a business selling tables. In January the business has the following transactions: Dave starts his business with $5, 000 that he borrowed from his mother. Dave’s mother expects him to pay the money back in the future. The business bought 10 tablets for $500 each which Dave paid for with cash. The business sold all 10 tables straightaway for $600 each in cash. How do we represent these transactions? How much cash does he have? How much profit? 3

Application of A/cing Equation How do we represent these transactions? How much cash does he have? How much profit? 4

Application of A/cing Equation Transaction Asset/ Expense/ Loss Income /Liability $5, 000 that he borrowed from his mother 10 tables for $500 each 10 tables straightaway for $600 5

Application of A/cing Equation Transaction Cash $5, 000 that he borrowed from his mother 10 tables for $500 each 10 tables straightaway for $600 6

Calculation of Profit Sales x Opening Inventory x Purchases x Closing Inventory (x) Cost of Sales (x) Gross Profit x 7

Balance Sheet