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    Accounting Equation and Double Entry System3

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    Malvin Roix Orense
    The accounting equation states that assets are equal to liabilities plus owner's equity. This equation forms the basis for double-entry bookkeeping. In a double-entry system, every financial transaction affects at least two accounts, with equal and offsetting debits and credits. The normal balance of different types of accounts is tracked through debits and credits, with increases or decreases recorded depending on the account. For example, assets and expenses are normally debited to record increases, while liabilities, equity, and income are normally credited to record increases. The document provides an example of using the accounting equation to solve for total assets given known values of liabilities and owner's equity.

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    Accounting Equation and Double Entry System3

    Uploaded by

    Malvin Roix Orense
    202 views11 pages
    The accounting equation states that assets are equal to liabilities plus owner's equity. This equation forms the basis for double-entry bookkeeping. In a double-entry system, every financial transaction affects at least two accounts, with equal and offsetting debits and credits. The normal balance of different types of accounts is tracked through debits and credits, with increases or decreases recorded depending on the account. For example, assets and expenses are normally debited to record increases, while liabilities, equity, and income are normally credited to record increases. The document provides an example of using the accounting equation to solve for total assets given known values of liabilities and owner's equity.

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    The accounting equation states that assets are equal to liabilities plus owner's equity. This equation forms the basis for double-entry bookkeeping. In a double-entry system, every financial transaction affects at least two accounts, with equal and offsetting debits and credits. The normal balance of different types of accounts is tracked through debits and credits, with increases or decreases recorded depending on the account. For example, assets and expenses are normally debited to record increases, while liabilities, equity, and income are normally credited to record increases. The document provides an example of using the accounting equation to solve for total assets given known values of liabilities and owner's equity.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    202 views11 pages

    Accounting Equation and Double Entry System3

    Uploaded by

    Malvin Roix Orense
    The accounting equation states that assets are equal to liabilities plus owner's equity. This equation forms the basis for double-entry bookkeeping. In a double-entry system, every financial transaction affects at least two accounts, with equal and offsetting debits and credits. The normal balance of different types of accounts is tracked through debits and credits, with increases or decreases recorded depending on the account. For example, assets and expenses are normally debited to record increases, while liabilities, equity, and income are normally credited to record increases. The document provides an example of using the accounting equation to solve for total assets given known values of liabilities and owner's equity.

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    © All Rights Reserved
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    ACCOUNTING EQUATION

    AND DOUBLE ENTRY


    SYSTEM
    ACCOUNTING EQUATION

     Itis considered as the most basic tool


    of accounting.
    Assets= Liabilities + Owner’s Equity

    *The increase and decrease in assets are recorded in


    the opposite manner (mirror image) as liabilities and
    owner's equity are recorded.
    Owner’s
    assets liability
    equity
    EXAMPLE:

     Mr. Medina has liabilities of


    P147,000 and owner’s equity of
    P236,500. How much is his assets?
    SOLUTION
     Given: L= P147,000
    O.E= P236,500
    A=?
    Formula: Assets=Liabilities+Owner’s Equity
    A= 147,000+236,500
    A= 383,500
    Substitute now the value of asset to verify if the
    equation is balance:
    A=L+OE
    383,500=147,000+236,500
    383,500=383,500
    DOUBLE- ENTRY SYSTEM

     Accounting is based on a double-entry system


    which means that the dual effects of a
    business transaction is recorded.
     Each transaction affects at least two accounts.

     For every debit side entry must have a


    corresponding credit side entry and therefore
    must be equal to each other.
     An account is debited when an amount is
    entered on the left side of the account and
    credited when an amount is entered on the
    right side.
    Debit (Dr.) Credit (Cr.)

    xx xx
     The account type determines how increases
    or decreases in it are recorded.

    ASSETS LIABILITIES AND OWNER’S


    EQUITY

    Debit Credit Debit Credit


    (+) (-) (-) (+)
    Increases Decreases Decreases Increases

    Normal Normal
    Balance Balance
    INCOME STATEMENT ACCOUNTS

    Debit for decreases in owner’s Credit for increases in owner’s equity


    equity Income
    Expenses

    Debit Credit Debit Credit


    (+) (-) (-) (+)
    Increases Decreases Decreases Increases

    Normal Normal
    Balance Balance
    NORMAL BALANCE OF AN ACCOUNT

     It refers to the side of the account (debit or


    credit) where increases are recorded.

    Debit balance - Asset, owner's withdrawal and


    Expenses accounts
    Credit balance – Liability, owner's equity and
    Income accounts
    NOTES:
     Guys, aralin niyo ng mabuti ito kasi may recitation
    tayo next meeting 
     Make sure na lahat ay may dalang hard copy. Ang
    walang copy ay ABSENT. Pa-inform na rin ang iba
    niyong kaklase na meron nakong inupload na
    hand out once na nakita niyo to para makapag
    produce sila at makapag advance reading na rin 

    Study First. Godbless! 


    -Leslie 

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