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Accounting equation serves as the very basis of a double entry accounting practice. The financial practices have three basic components invariably around the globe
• Stockholder’s equity
The accounting equation is represented as: Assets = liabilities + shareholder equity. The left hand side shows the debits of a company whilst the right hand side displays the credits taken by it. The equation proves that they are equal in amount.Every transaction in the accounts of a company changes a minimum of one term of the equation; yet the equation remains balanced.Accounting Equation Assignment Help Online Service gives a detailed explanation about accounting equation.
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Components of Accounting Equation
The components of the accounting equation shall be discussed in details under Accounting Equation Assignment Help Online Service.
These are the resources a company owns or has the power to access. There could be different forms of assets. A few are palpable like cash or property where as there are others which can’t be touched like copyright or what other organizations owe a company in return of something they did. All these things shall help strengthen the power and position of a company.
Liabilities are the amounts that a company needs to offer the creditors who have helped gain the assets at the first place. A creditor can ask for the sum on completion of the time period of loan. The company is payable to all such creditors. The creditors in a way have claims on the assets of the company. The difference between the assets and liabilities of a company show the equity of shareholders. That is Assets – liabilities = shareholder equity. The liabilities are often divided into long term and short term ones. The short ones have to be paid off within a year while long terms take more than a year.
- Shareholder’s Equity:
This is the remainder after the liabilities are done away with. The investors, partners or shareholders own a considerable part of a company’s assets. They can increase this equity by investing more money and hence owning more capital share. Equity becomes lesser pertaining to the expenses and by withdrawal of company funds.
- Practical Instance:
Accounting Equation Assignment Help Online Services hall provide examples for better grasping by the students requiring help.
When a company wishes to recruit more employees for an urgent business transaction, the requisite salaries of the employees can be paid by using up the assets of the company. The company could also utilize the stockholder’s equity. Payment can be received from creditors. This shall come under the liabilities.
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