Accounting Equation Paper
Shannon Straight
ACC/300
April 20, 2015
Kimberly McMillon

Accounting Equation Paper “One type of accounting report is a balance sheet, which is based on the accounting equation: Assets = Liabilities + Owners’ Equity. The balance sheet — also called a statement of financial condition — is a “Where do we stand at the end of the period?” type of report. The header of a balance sheet lists the date that it was prepared (The Essentials of Accounting Basics).” The equation should always remain in balance for every accounting transaction. If there is an increased in an asset account, there has to be a corresponding decrease in another assets account or a corresponding increase in a liability or equity account. To make a balance sheet, we should list the assets and come up with a number. Then we need to list the liabilities and equity and come up with a number. If two numbers are equal, then our balance sheet will balance. It is the balance of one’s assets to the liabilities. Owners’ equity contains the owners capital accounts and retained earnings, and is increased by revenues, owners investments, and issuance of stock. It is decreased by expenses, drawings, dividends and treasury stock.

If I have invested cash in a business, we increase assets and increase the owners, equity, we then invested cash and increase assets; the person who invested the cash increases owners’ equity. If I pay for the utilities used in the business, I should decrease assets, and decrease equity; if paid in cash, it will decrease the assets (the cash account). The cash paid was for an expense, therefore later in the accounting cycle, that will be a negative amount on the income statement. If there are any supplies purchased for cash, there will be no changes in assets, no change in liabilities, and no owners’ equity; exchanging one asset for another asset.