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1.2 Accounting Equation

This document discusses the accounting equation, which defines that assets must equal liabilities plus owner's equity. It provides examples of how the accounting equation applies when a business is started and resources are supplied by the owner as well as other stakeholders. The accounting equation forms the basis for double-entry bookkeeping to track the effects of business transactions on assets, liabilities, and owner's equity.

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Premjeet Singh Mann
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43 views24 pages

1.2 Accounting Equation

This document discusses the accounting equation, which defines that assets must equal liabilities plus owner's equity. It provides examples of how the accounting equation applies when a business is started and resources are supplied by the owner as well as other stakeholders. The accounting equation forms the basis for double-entry bookkeeping to track the effects of business transactions on assets, liabilities, and owner's equity.

Uploaded by

Premjeet Singh Mann
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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1.

2 Accounting Equation
● To define assets, liabilities and
owner’s equity
● To apply the accounting equation

Success criteria:

Learning Lv 1: Able to calculate


assets/liabilities/owner’s equity

Objectives Lv 2: Able to memorise the


accounting equation
Lv 3: Able to apply the accounting
equation and identify the role of
book-keeper
Let’s listen to this
story
Business starts with……..
Owner supplying resources, e.g. cash or motor vehicles.

And now, owner consider separate entity from the business.

Those resources are what the business owes to the owner.

This is owner’s equity(or capital)

And this is also the resources of monetary value that a business owns.

This is assets.
The story doesn’t stop here…...
There are other people than owner supply resources to the business.

This is liabilities

This is the amounts that the business owes people that supply the resources.

Example of liabilities are trade payables, overdrafts and loans


And finally the end of the story is…...

Owner’s
Assets Liabilities
equity

ACCOUNTING EQUATION
Key terms to learn
● Textbook page 9
Solidify
Now, tell the story again to your friend
Classify them
Matching game

Classify the assets, liabilities and owner’s equity


Assets Liabilities Owner’s equity
Business premises Trade payables(supplier) Owner’s car introduced to
business

Bank Balance Bank overdraft Money placed in business


by owner

Trade receivables(customer) Bank loan Profit

Computer Mortgage Loss

Cash in hand

Fixtures and fittings (eg.


Office cabinets)

Inventory (Goods that


business bought for resell
purpose)

Motor Vehicle

Office equipment
And finally the end of the story is…...

Owner’s
Assets Liabilities
equity

ACCOUNTING EQUATION
Solidify - Accounting Equation
● Textbook page 10, Activity 1

Mark your answer and fill in


the success criteria tracker
Homework
Textbook page 16 to 17, try question 1-5
● To understand the effect of
transactions on the assets,
liabilities and owner’s equity
● To outline the double entry
Learning system of book-keeping

objectives Success criteria:


Lv 1: Able to apply the accounting
equation
Lv 2: Able to apply the accounting
equation & differentiate A&L
Lv 3: Able to apply the accounting
equation to calculate the owner’s
equity
Prepare
Write down the accounting equation
Key terms to learn
● Textbook page 14 and 15

Non-current asset
Current asset
Non-current liabilities
Non-current asset
Current liabilities
Non-current asset
Current asset
Current liabilities
Current asset
Double entry system
Example
Anita Goswell decided to start a busines.
Her accounting equation will be:
Assets = Liabilities + Owner’s equity
0=0+0
Solidify
Practice 1.2.1 & 1.2.2

Mark your answer for Practice


1.2.2 and fill in the success
criteria tracker
Classwork
● Practice 1.2.3
Homework
Practice 1.2.4

Mark your answer for Practice


1.2.4 and fill in the success
criteria tracker

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