Need help in preparing a 850 word document stating the accounting equation. Explain and define all components of the equation and provide examples of each.
Please list references and do not copy word for word.
Thank you.© SolutionLibrary Inc. solutionlibary.com 9836dcf9d7 https://solutionlibrary.com/business/accounting/accounting-process-7dnf
...value of the current assets in hand and subtracting the value of any current liabilities. The accounting equation is the substratum of the balance sheet equation. One perspective on the accounting equation namely, that assets = liabilities + owner's equity is the same equation that can be seen in the balance sheet of a proprietorship. The accounting equation will continue to be in balance if double entry is used. How does the owner's equity change? Profits lead to an increase in owner's equity and losses cause the owners equity to decrease. Consider the following examplew, if the entity's sales increase and profits go up by $1,500, the owner's equity increases by that amount. On the other hand if the entity's expenses increase by $1,500, the owner's equity reduces by that amount.
There are some authorities that feel that the accounting equation is the fundamental balance sheet equation. It establishes that the assets of an entity are financed by equity invested by owners and borrowings derived from outside sources. It is believed that the accounting equation is behind the system of recording debits and credits. For example, if a person sells goods for cash $1,000. the shareholder's equity increases by $1,000 and the assets increase by $1,000. Take another example, if an entity sells its assets for $3,000 cash and pays off liabilities. This action reduces the assets by $3,000 and the liabilities by ...