Accounting·Basic accounting systems · NSSCO 1.2
The accounting equation
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This is the single most important idea in all of accounting: Assets = Owner's Equity + Liabilities. We'll meet each element, see how they relate, watch the two sides stay perfectly balanced through five real transactions, and discover that the Statement of Financial Position is simply this equation, drawn up on a date.
What you'll learn in this lesson
By the end you should be able to (NSSCO Accounting 1.2):
- State the accounting equation
- Explain the elements of the accounting equation (assets, owner's equity, liabilities)
- Explain the relationships between the elements of the accounting equation
- Explain the Statement of Financial Position and its components
- Relate the accounting equation to the Statement of Financial Position
- Illustrate the effects, with reasons, of transactions (capital, drawings, assets, liabilities, income, expenses) on the elements of the accounting equation
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Ms Pieters and Mike talk through the whole topic — with the figure and working drawn live.