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Summary Basic Accounting Equation
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It involves short and precise meaning of the basic accounts and also the equation.
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FAC3703 Assignment 1 Due 7 September 2024 (Detailed Answers)
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FAC3703 Assignment 1 Semester 2 - DUE 7 September 2024
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THE ACCOUNTING EQUATIONASSET = LIABILITIES + OWNER’S CAPITAL
Where as:
A= L+C
L=A-C
C=A–L
ASSET - is a resource controlled by the entity as a result of past events and from which future
economic benefits are expected to flow to the entity.
LIABILITIES - is a present obligation of the entity arising from past events, the settlement of which
is expected to result in an outflow from the entity of resources embodying economic benefits.
CAPITAL/EQUITY/OWNER’S CAPITAL/OWNER’S EQUITY - is the residual interest in the
assets of the entity after deducting all its liabilities.
THE ACCOUNT
The basic summary device of accounting is the account.
A separate account is maintained for each element.
An account may be defined as detailed record of increases, decreases, and balance of each element
that appears in an entity’s financial statement.
The simplest form of the account is known as the “ T” account because of its similarity to the letter
“T”.
The account has three parts as follows:
ACCOUNT TITLE
LEFT SIDE OR RIGHT SIDE OR
DEBIT SIDE (Dr.) CREDIT SIDE (Cr.)
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