Post on 24-Jan-2017
The Basic Accounting Equation
Balance Sheet
Assets
Liabilities
Equity
Income
Statement
Revenue
Expense
Net Income
The Language of Accounting How we speak
Study using a dictionary
• Make a list of words from the last slide.
• Look up each word in the dictionary
• Study a word and write down its meaning on
an index card
• You will add to each card as we learn more
about the words meaning.
The Equation
•
• A = Assets
• L =
Liabilities
• OE =
Owners
Equity
Assets:
Make a list of your Assets.
What are the total assets?
Total Assets
Assets are what you own
Liabilities
• Visa/MC amounts
owing
• Car Loan
• Student Loan
• Line of Credit
• Mortgage
Make a list of your liabilities
What are the liabilities?
Equity
What is the Equity Amount?.
Total Liabilities & Equity
Assets are equal to Liabilities & Equity
Assets minus Liabilities = Equity
Can you determine your Equity.
Add up Assets Add up
Liabilities
Find the
difference
between assets
& Liabilities.
This equals
your Equity!
The Balance • The equation MUST always balance!
Now that we have our starting point, we can begin to add
revenue and deduct expenses to see how our Equity will
increase or decrease..
Now, lets see how Net Worth
changes
• You start by adding accounts
• Then tracking amounts you earn
• Track amounts to be spent.
• We can see our Net Worth
increase or decrease
Revenue
Amounts that you earn, that are subject to
income tax.
• Wages
• Income from your second job
• Interest or dividends from investments
Expenses
The amounts that you pay from your income for
current bills every month.
• Heat
• Hydro
• Telephone
• Rent
• Cable
• Entertainment
• Clothing
How Equity Changes
Add Revenue Minus Expenses
The New Updated Balance Sheet
Reference Sheet
Basic Accounting Equation Versions
http://www.foxstone.com.au/accounting-
wallchart.html July 1, 2013
Basic Liabilities Equation
http://www.motherjones.com/kevin-
drum/2009/05/taxonomy-consumer-credit
July 1,2013
Canadian Money http://www.ivany.org/cheap-
smartphone-plans-in-canada/ July 1, 2013
House & Car
http://rightwaysrichard.blogspot.ca/2013/01/is
-having-car-still-symbol-of-freedom.htmlJuly
1, 2013
Boat
http://www.ultimatemarine.ca/TRACKERBOA
TS/tabid/254/Default.aspx July 1, 2013
Investment Icon
http://cargocollective.com/samcoomber Juy
1, 2013
Computer http://www.computersandthings.ca/
July 1 2013
Reference Sheet 2
Product Liability
http://www.richardmolin.com/specialty/produc
t-liability.html July 6, 2013
Payday loans
http://www.getrichslowly.org/blog/2011/09/12/
how-much-do-we-owe-others-and-when-
should-we-walk-away/ July 6, 2013
Debt
https://www.facebook.com/WorldOfDeception
July 6, 2013
Taxes http://mattersofopinion.net/2011/05/ July
6, 2013
Tax Bill http://www.golocalprov.com/news/new-
schillings-38-studios-to-owe-395000-tax-bill-
in-providence/ July 6 2013
Reference Sheet 3
Equity http://www.roninmortgage.com/is-a-
home-equity-loan-right-for-you/ July6, 2013
Money Tree
http://insidetradellc.com/blog/private-equity-
investing-a-growing-market/ July 6, 2013
Money Grows
https://www.google.ca/search?hl=en&site=im
ghp&tbm=isch&source=hp&biw=1391&bih=7
00&q=Equity&oq=Equity&gs_l=img.3..0l10.29
34.4328.0.13771.6.5.0.1.1.0.116.542.1j4.5.0..
..0...1ac.1.19.img.U53mfbFrYOo#facrc=_&im
gdii=_&imgrc=CoLClR8QW9yN2M%3A%3BV
KSUnfbrjSe69M%3Bhttp%253A%252F%252
Fevca.eu%252Fwp-
content%252Fuploads%252F2012%252F11
%252Fgrowing-sprout-
money.jpg%3Bhttp%253A%252F%252Fevca
.eu%252F2012%252F11%252F15%252Fpriv
ate-equity-shown-to-benefit-
economy%252F%3B250%3B220 July6. 2013
Reference Sheet 4
Piggy bank with 50 dollars
https://www.google.ca/search?hl=en&site=im
ghp&tbm=isch&source=hp&biw=1391&bih=7
00&q=Equity&oq=Equity&gs_l=img.3..0l10.29
34.4328.0.13771.6.5.0.1.1.0.116.542.1j4.5.0..
..0...1ac.1.19.img.U53mfbFrYOo#facrc=_&im
gdii=_&imgrc=HkgFNyjCleOnXM%3A%3BGl
R5Hrh37Q43MM%3Bhttp%253A%252F%25
2Fwww.mariecopeland.ca%252Fimages%25
2Fbest-home-equity-
loan.jpg%3Bhttp%253A%252F%252Fwww.m
ariecopeland.ca%252Fbest-home-equity-
loan.html%3B380%3B285 July 6, 2013