Accounting Equation Paper

The accounting comparability which we sock as Assets equals to Liabilities plus Equity for a sole proprietorship and for a corporation we know it as Assets equals to liabilities plus sh ar owners & equity. Assets are company owned, liabilities are what company owes and the difference between the both of them is the owners equity, these collar things are what the companies are measured by in the fiscal field. In beau monde to understand them more clearly and how the accounting equation shows a simple way of understanding the three amounts relating to one and another, which are the assets that include cash, account receivable, equipment.Then the liabilities include notes payable, accounts payable and salaries payable. Finally, owners and stockholders equity includes common stock and retained earnings. The accounting balance sheet is one of the biggest financial statements used by accountants and business owners, these are income statements, cash flow statements, and stockholders equity statements. Balance sheet allows the creditor to count on what a company owns as well as what he owes. These are very important things for psyche to know for potential investors and others.So as we know, the balance sheet reflects the accounting equation, it shows the reports of companys assets, liabilities, and owners and stockholders equity. If a company keeps their records up to date and accurate, the accounting equation will invariably be in balance, showing that the left side should always equal to the right side. This keeps the balance sheet equilibrate since all assets are financed either by equity or liabilities and also the accounting equation serves as the basis for the balance sheet.The balance sheet shows that the assets are on the debit side and liabilities and equity are on the credit side, so the accounting equation formulates in a way where the total debits should always equal the total credits. Every accounting equation has its effects on the accounting e quation, because every exploit alters the components presented in the equation, in a way that the equation is satisfied after each modification.