Fantastic Example Of Expanded Accounting Equation
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However each item in this equation can be further expanded which will give us the expanded accounting equation.
Example of expanded accounting equation. Remember in tutorial 2 we learned the basic form of the accounting equation as. The expanded accounting equation will be the same as a more compact view of. About Press Copyright Contact us Creators Advertise Developers Terms Privacy Policy Safety How YouTube works Test new features Press Copyright Contact us Creators.
However the relation between assets liabilities and equity still remains the same as in the basic accounting equation. Transaction one of the expanded accounting equation I provide services for cash of 7000 lets analyze this because we are collecting cash we will increase the cash account by 7000 because we are providing services we increase the revenue account by 7000. Assets Paid-up Capital Income Expenses Dividends Treasury shares.
In summary the expanded accounting equation is relevant when identifying how stockholders equity in a firm changes from time to time at a basic level. As the equity component of corporations is slightly different from that of sole proprietorship so its expanded accounting equation is also different. Lets take a look at a few example business transactions for a corporation to see how they affect its expanded equation.
Example of the Expanded Accounting Equation Taking an example of a corporation X to see how its business transactions affect its expanded equation. Assets Liabilities Owners Equity Expanded Accounting Equation is the advance version of basic accounting equation. Expanded Accounting Equation Paid-up Capital Treasury Stock if any Liabilities Income Expenses Dividends.
At the beginning of the year Corporation X was formed and 1000 10 par value stocks were issued. How to use the Expanded Accounting Equation. The expanded accounting equation for a corporation is.
Expanded Accounting Equation The Expanded Accounting Equation of sole proprietorship and partnership is Accounting Equation Assets Liabilities Owners Equity Expenses Revenue Drawings Account. The accounting equation basically says that at any point of the time the assets should equal the liabilities plus the equity the capital and the reserves. Following is the expanded accounting equation of corporations.
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