Accounting Equation

accounting equation

What Is Accounting Equation?

The accounting equation is taken into consideration to be the foundation of the double-entry accounting system. On a company’s balance sheet, it indicates that a company’s general assets are same to the sum of the company’s liabilities and shareholders’ equity.

What Is the Basic Accounting Equation Formula?

The basic accounting equation formula is,

Asset = Liabilities + Owner’s Equity

The balance sheet holds the idea of the accounting equation:

  • Locate the company’s overall belongings at the balance sheet for the period.
  • Total all liabilities, which need to be a separate list at the balance sheet.
  • Locate overall shareholder’s equity and upload the wide variety to overall liabilities.
  • Total assets will identical the sum of liabilities and overall equity.

What Is Expended Accounting Equation Formula?

expanded accounting equation

The expanded accounting equation breaks down shareholder’s equity (in any other case referred to as owners’ equity) into greater intensity than the essential accounting equation. It lets in analysts and accountants to look the additives of shareholder’s equity and the way it affects the company. It breaks down net income and the transactions associated with the owners (shares, etc.).

The Expended Accounting Formula is break down into:

Asset = Liabilities + Share Capital + Retained Earnings + Revenue – Expenses


Asset = Liabilities + CC + BRE + R -E -D


  • CC is Contributed Capital
  • BRE is Beginning Retained Earnings
  • R is Revenue
  • E is Expenses
  • D is Dividends.

What Is the Balance Sheet Equation Formula?

The balance sheet is one of the 3 essential economic statements and is prime to each financial modeling and accounting. The balance sheet presentations the company’s general property and the way the property are financed, either through either debt or equity. It also can be known as an assertion of internet really well worth or an assertion of economic position. The balance sheet is primarily based totally at the essential equation:

Asset = Liabilities + Equity

What Is Income Statement Equation Accounting?

An income statement is one of the 3 crucial monetary statements used for reporting a company’s monetary overall performance over a selected accounting period, with the opposite key statements being the balance sheet and the assertion of cash flows. Also referred to as the earnings and loss assertion or the assertion of sales and expense, the income statement typically focuses on the company’s sales and fees throughout a specific period. The Net Income is Calculated is Based On the Following,

Net Income = (Revenue + Gains) – (Expenses + Losses)

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