THE ACCOUNTING EQUATION

|ASSETS = CAPITAL + LIABILITIES |

Assets: resources in the business
Capital: resources supplied by the owner
Liabilities: resources supplied by someone other then the owner

Capital = -

Accounts recievable / Debtor is a person who owes money to your business for goods or services supplied to him. It is a type of assets.

Accounts payable / Creditor is a person to whom money is owed for goods or services. It is a type of liabilities.

Exercise 1:
State which of the accounting category each belongs to:
|e.g. stock |Asset |
|Trade creditors | |
|Motor cars | |
|Land | |
|Trade debtors | |
|Loan from HSBC | |
|Cash in hand and Cash at Bank | |
|Owner’s Capital | |
|Taxes owing to the government | |
|Furniture and Fitting | |

EFFECT OF TRANSACTIONS

YOU BUSINESS COMPANY (Owner)

Note: For each transaction, you have to find out which elements have changed (i.e. increase or decrease).

Exercise 2:

1) On May 1, 2013, Jacky started in business and put $2,500 into a bank account for the business. - $2,500

YOU