Description
Assignment 1: Discussion—The Accounting Equation
By the due date assigned, respond to the following in the Discussion Area below:
The accounting equation is assets = liabilities + owner’s equity.
Please explain the relationship between economic resources and claims to economic resources.
- Why must this equation always balance?
- What transactions increase or decrease owner’s equity?
- How does net income or loss affect owner’s equity?
- Provide an example of a transaction, applied to the accounting equation.
Be sure to cite any sources using APA style. You may use this APA Citation Helperas a guide.
Explanation & Answer
Attached.
Running head: ACCOUNTING EQUATION
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Accounting Equation
Institutional Affiliation
Date
ACCOUNTING EQUATION
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Introduction
The accounting equation also referred to as accounting formula or the balance sheet
equation is the foundation upon which double entry accounting is established. Through the
accounting equation, one can understand that all assets in business are financed through
borrowing of cash or using the shareholders’ money. It, therefore, states that, Assets = Liabilities
+ Owner’s equity. In the following paragraphs, we shall talk about the relationship between
economic resources and claims to economic resources with a lot of focus on things that revolve
around the accounting equation.
The Accounting Equation
In a business, economic resources are the available assets such as cash, inventories,
buildin...
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