The Accounting Equation Learning Goal Define assets liabilities
The Accounting Equation
Learning Goal: • Define assets, liabilities & equity by means of fundamental accounting equation
1. What does a person require in order to begin a business? • Capital- Owner investment or outside investors • Equipment, furniture, computers
2. In general, the term given to all the above items is ______ Assets (own) 3. How does the business acquire the needed economic resources? Liabilities (Borrow) a) ________ creditors will have claims against the economic resources. Owner’s Equity (Owner’s Investment) b)__________ the owner will have claims against the economic resources.
4. The ACCOUNTING EQUATION: Owner’s Equity Assets Liabilities + = ______________ $100, 000 $70, 000 $30, 000 5. The accounting equation is a: - Fundamental concept and basis for all accounting today
Question: • On Sept. 15 of the current year, Donna Lyon began the practice of law under her name. Her business’s assets and liabilities on the date are as follows: • Accounts payable $200, Cash $800; Bank loan $1 200, Office Equipment $2 200; Law Books $2 400. • Determine the Owner’s Equity and construct an accounting equation that itemizes the three elements, A, L, & OE. Assets Cash $800 Office Equipment $2, 200 Law Books $2, 400 = $5, 400 = Liabilities + Owner’s Equity Accounts Payable $200 Bank Loan $1200 - = $1, 400 = $4, 000
Homework: • Answer Exercise #1 -6 p. 20 (t), p. 6 -7 (w)
- Slides: 7
