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ACC 205 Week 1 DQ Accounting Equation

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ACC 205 Week 1 DQ
ACC 205 Week 1 DQ
Accounting Equation

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ACC 205 Week 1 DQ
Accounting Equation
As you have learned in this week’s readings the Accounting Equation is + Owners’ Equity. Is
the accounting equation true in all instances? Provide sample transactions from your own
experiences to demonstrate the validity of the Accounting Equation.
What does the term “account” mean? What are the dierent classicaons of accounts? How do
the rules for Debits and Credits impact accounts? Please provide an example of how debits and
credits impact accounts.
The Accounting Equation
The Accounting Equation
All aspects of accounting is based off of the fundamental principle of
Assets = liabilities + owners’ equity. Each of these elements has their
own unique function within the accounting equation. In the accounting
equation, each side of the equation balances with the other at all times.
This equation is commonly used on the balance sheet.
Assets are anything of value that a company owns, which includes cash
as well. Several types of assets exist, such assets are as follows:
Current, investments, capital, and intangible. These assets are all
combined for a company’s total assets. Current assets are assets with
dollar amounts that continually change. Such assets may include cash,
inventory, raw materials, and raw materials. Investments can be owned
by companies which may include securities such as stocks and bonds.
Capital assets are permanent things that a company may own. This

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ACC 205 Week 1 DQ
would include land, buildings, vehicles, and equipment. Other things
such as computers, appliances, and furniture can also be considered
capital assets as long as they are being used and not being sold.
Intangible assets include patents, copyrights and other non-material
assets that have value.
Liabilities are anything a company owes to businesses or other people;
there are two types of liabilities. Current liabilities are liabilities that are
usually paid within a year. Such liabilities consist of money owed to
vendors, suppliers, employees, short-term loans, and other bills. Long
term liabilities are liabilities that extend past a year. This may include
bills such as a mortgage.
Owners’ Equity
According to "Dunn & Bradstreet Credibility Group" (n.d.), "Owners'
equity, also called capital, is any debt owed to the business owners. For
example, if you invested $50,000 of your savings to start a business,
that amount is recorded in a capital account, also referred to as an
owners'-equity account. In publicly traded companies, outstanding
preferred and common stock also represents owners' equity.” (Owners
Equity). A business will also record their revenues and expenses in
capital accounts due to the fact that it relates to how much money is
made over time. At the end of the cycle, the profits get transferred to a
capital amount.
According to "Dunn & Bradstreet Credibility Group" (n.d.), "Assets,
liabilities and owners' equity are the three components that make up a
company's balance sheet. The balance sheet, which shows a business's
financial condition at any point, is based on this equation:
Assets = Liabilities + Owners' Equity, this equation is also the framework
for keeping track of money as it flows in and out of your company.
Starting with the first penny you earn, you'll record in a general ledger
each and every transaction using a double-entry system of debits and
credits. Assets get recorded on the top or the left side of the balance

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Awesome! Perfect study aid.