Discuss the Accounting equation

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Discuss the Accounting equation

Posted by Ripon Abu Hasnat on Thursday, May 29, 2014 | 0 comments

Earlier it was stated that the accounting entity concept regards the business as a separate accounting entity from its owner. The formula for the Accounting Equation extends this concept.

The Accounting Equation is: Assets − Liabilities = Equity. In an abbreviated form this is A − L = EQ.

By simple transposition the Accounting Equation can also be shown as:

1. Assets = Liabilities + Equity (A = L + EQ)

2. Assets − Equity = Liabilities (A − EQ = L).

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