Accounting Equation Explanation

You will get ...

• Expressing mathematical equations
  
• Elements of mathematical equation interpretation
• The capital city is influential

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Mathematics is the basis of mathematics. This is the basis of double-entry accounting.

Please, if you want to understand double entry or modern accounting, you should have a good and clear understanding of mathematical equations. Since the concept of accounting is clear to you, then journal entries, notebooks, trial balances, spreadsheets, balances ... will be clear. In other words, it will be easier for you to understand these mathematical functions.

Accounting equations.
An equation in which total assets and total liabilities are represented equally is called an accounting equation. We can find the sum of assets, liabilities and equity according to the accounting calculation.

Below we show the calculation:

A = L

Or if we solve the equation we get...

A=L+E

over here ,

A = Trump

L = liability

E = equity or equality or equality

So the billing equation is perfect because...

Assets = Liabilities + Equity

We will discuss the parts of the mathematical formula in more detail so that you can understand them better.

However, the equation is a double-input system. This means that the formula presented in the double entry system is called the mathematical formula.

Components of a mathematical equation.
Accounting units are assets, liabilities and equity or equity. We discuss below…

thing.
Assets are business rights from which you can receive future financial benefits. for example; Accounting records, treasury bills, certificates of deposit, buildings, land, furniture and equipment etc.

Liability:
The parties who receive money from the business are responsible. So liability is the amount of money the company has. for example; Purchase of goods on credit, accounts payable, short term loan, long term loan, medium term loan, etc.

Capital / Equity.
Equity is the business owner's investment. It is also a type of responsibility for the company. Because with double entry system, the business works like a synthetic entity.

If the entrepreneur withdraws money from the business , it is recorded in the withdrawal register. In such transactions, equity or equity is paid to show the decrease in business ownership.

To be precise, the words are the same. Think about the problem, not the sole proprietorship or partnership in the business.

Factors affecting capital.
Some factors affect the capital of the company. We will talk about it below.

1. Income.
Income is the exchange value of a good or service. For income, capital is affected. As income increases, capital increases. Conversely, when income falls, so does capital.

2. Cost.
The money spent on buying goods or services is called expenditure. In other words, the cost of acquiring assets or services to earn income is called expenditure.

Costs affect capital. As taxes increase, capital decreases. On the contrary, capital increases as costs decrease.

3. Results.
If a business owner takes money, goods, services, or assets from the business, this is a withdrawal.

When capital is withdrawn, it is affected. As output increases, capital decreases. On the contrary, when production decreases, capital increases.