Transcript Accounting for a Business

CHAPTER 3
ACCOUNTING
FOR A BUSINESS
Accounting Equation
The elements of the accounting or balance
sheet equation are:
• Assets - resources (items) with a dollar value
that are owned by a business;
• Liabilities - what a company owes to its nonowners for assets, products or services; and
• Capital - what the owner invests into the
business.
Accounting Equation
• The accounting equation shows the
relationships of the elements in accounting.
• To find Capital: the equation will be
Capital = Assets + Liabilities
• To find Assets: the equation will be
Assets = Liabilities + Capital
• To find Liabilities: the equation will be
Liabilities = Assets – Capital
Balance Sheet
(Horizontal Format)
N. Marcano
Balance Sheet
As at January 5, 2005
ASSETS
Equipment
Stock
Bank
$
20 000
3 000
177 000
200 000
Name of Organization
Name of Statement
Date
Financed by
Capital at start
$
200 000
200 000
Balance Sheet
(Vertical Format)
N. Marcano
Balance Sheet
As at January 5, 2005
ASSETS
Equipment
Stock
Bank
Financed by
Capital at start
$
20 000
3 000
177 000
200 000
200 000
Name of Organization
Name of Statement
Date