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Accounting Equation Paper

In: Business and Management

Submitted By Pinkfrog1211
Words 426
Pages 2
Accounting Equation Paper
ACC 300
University of Phoenix

Accounting Equation Paper
No matter how big or small a company is, the business will have some sort of financial transaction coming in or out that will affect the company’s financial standing. In any company, the accountant or accounting department plays a crucial role in ensuring the company succeeds. The main role of accounting is to analyze records and keep track of all financial transactions. The resources that make up a company’s assets, as well as the accounting equation, are liabilities and owner’s equity. At first, owner’s equity is affected by capitals such as issuing stocks. Once the business is up and running, income as well as expenses will be added to the balance sheets. Assets include everything the company owns, from the building to the package of paperclips. Liabilities are debts the company has, to other businesses or individuals. These debtors could include vendors, employees, or financial institutions that loaned money. Equity is also referred to as capital and consists of assets and any debts owed to the business from outside sources. In order to understand the accounting equation, the accounting department as well as leadership must understand how these relate to one another. The accounting equation is as follows: Assets = Liabilities + Owners/Stockholders Equity. Examples of assets include cash, account receivable, and equipment (Kimmel, 2011).
The way that this accounting equation relates to the component of the balance sheet is this declares the company’s financial position. The company’s balance sheet will show the total assets which should equal out to the total liabilities plus any equity the owner may have. The list below shows what would equal plus’s and what would be a minus on the balance sheet.

ASSETS = LIABILITIES + OWNERS/STOCKHOLDER EQUITY +...

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