Principles of Accounts Introduction to The Accounting Equation

Principles of Accounts Introduction to The Accounting Equation http: //www. accountantsonline. com. hk l What is the accounting equation? l What is capital? l What are assets? l What are liabilities? l Games by Ng Lai Ping (4 A)

What is the accounting equation? The whole of accounting is based upon a very simple idea. This is called the accounting equation which sounds complicated, but is in fact easy to understand. The equation is: Assets = Capital + Liabilities It can be seen that the two sides of the equation will have the same totals. This is because we are dealing with the same thing from two different points of view.

What is a capital? Capital is the total amount of resources supplied to a business by its owner. e. g: Owner pays more cash into the company.

What are Assets? Assets are resources owned by a business. Also benefits such as debts owed by customers, the amount of money in the bank account and the cash at hand are included. Other examples: Buildings, machinery, stock of goods, and motor vehicles.

What are Liabilities? Liabilities are the total of money owed for assets supplied to a business by people other than the proprietor. e. g: Buy goods $400 on credit. $400 is our company’s liabilities. (i. e. we owe creditors $400)

Games back 1. Which one is an example of assets? (a)Athlete (b)Table (c)Dancer

Wrong! Do it again! (1), (2), (3), (4) Answer

Answers 1. (b) Table 2. (a) Owner pays $150 in to business 3. (c) Buy goods on credit 4. (a) Assets = Capital + Liabilities (80000 = 50000 + 30000) Question 1 Question 2 Question 3 Question 4

Right! Question 1 Question 2 3 Question 4

Wrong! Question 1 Question 2 3 Question 4

Games back 2. Which one is Capital? (a) Owner pays $150 into business (b) Boss (c) House

Games back 3. Which one is an example of liabilities? (1) Worker (2) Owner pays $10 in to company (3) Buy goods on credit

Games back 4. Which one shows the accounting equation? Capital=50000, Assets=80000, Liabilities=30000 (a)Assets=Capital+Liabilities (80000=50000+30000) (b)Liabilities=Assets+Capital (30000=80000+50000) (c)Capital=Liabilities+Assets (50000=30000+80000)