the accounting equation
Post on 14-Jun-2015
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PERFECT BALANCE BOOKKEEPING
HOW TO UNDERSTAND WHAT’S CONFUSING
ASSET = LIABILITIES + OWNER EQUITY
WHAT ARE ASSETS
• CASH•ACCOUNTS RECEIVABLE• INVENTORY• FIXED ASSETS
WHAT YOU OWN
WHAT ARE LIABILITIES
WHAT IS OWNER EQUITY
WHERE DOES INCOME AND EXPENSE FIT INTO THE ACCOUNT EQUATION
ASSETS INCOME
WHERE DOES INCOME AND EXPENSE FIT INTO THE ACCOUNT EQUATION
LIABILITIES EXPENSE
Now that you know the difference. Let’s put the pieces
together
Every transaction has two sidesSALE
BANK ACCOUNT
CASH
ASSET INCOME
CREDITACCOUNT RECEIVABLE
Every transaction has two sidesPURCHASE
BANK ACCOUNT
CASH
ASSET LIABILITY
CREDIT
ACCOUNT PAYABLE
REVIEW
BALANCE SHEETASSETS• CASH • ACCOUNT RECEIVABLE• INVENTORY• FIXED ASSETSLIABILITIES• ACCOUNTS PAYABLESEQUITY
INCOME STATEMENT• INCOME/REVENUE
• EXPENSE/PURCHASES
THE PIECES MAKES THE EQUATION BALANCE
PERFECT BALANCE BOOKKEEPING
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