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Kamran Khan 3 rd Lecture Email address: kamranuni@yahoo.com
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Assets and Equities are the basic Elements of Accounting. we can express these Elements by an equation known as Accounting Equation Assets = Equities OR Assets = Owner Equity+Liabilities Every transaction effects one or more Elements of Accounting(Assets and Equities) e.g. if the machinery is purchased for cash. Assets(Machinery) = Assets (Cash) If the machinery is purchased on credit(loan) basis Then Assets = Liability of outsider Elements of Accounting may b expressed in + or -
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3 If a vegetable shop has total value of assets equal to $1000 and owner invest $600 from his own pocket and the remaining $400 he acquire from his friend who is not owner of the business and invest in the business. So here $1000 is the value of the assets of business $400 is the liability and $600 is owner equity’s. Kardan Institute of Higher Education
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TransactionEffectExplanation Purchased machinery for cash 20000 Assets(machinery) + Assets(cash) _ Money was exchanged for Machinery Paid wages in cash 300 Assets (cash) _ Owner Equity(wage)_ Money was exchanged for services Borrowed cash 5000 from bank Assets(cash) + Liability o/siders _ A liability as a/c payable increased in exchange of money
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