Question

Explain each part of the accounting equation in No. 7:

The total debts equal the total credits and it can be expressed by the total assests equaling the liabilities plus the equity. If someone was to buy college textbooks and had $300 of cash on hand for $800 worth of texts books and puts the other 500 on a credit card, the sum of his assets are worth $800 and the liabilities he has are $500 plus his $300 equity.

Provide at least three examples of each part of the accounting equation: NEEDING THIS PART ANSWERED:)

Answer 1

Example 1

1. you bought machine for $ 10K paying $ 2k in equity and rest payable in form of note.

Accounting equation- 8,000 (assets)=8,000 (liability)+ 2,000 (equity)

2. Customer paid Rs. 6,000 as advance for six month against revenue at the start of month. One month revenue accrued.

Accounting equation- 6,000 (assets)=5,000 (liability)+ 1,000 (equity)

3. Prepaid insurance of $ 3000 for 6 months paid at the start of month. One month already charged.

Accounting equation- -500(assets)=0 (liability)+ -500 (equity)