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The basic accounting equation
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The fundamentals of accounting explained in a couple of minutes
Duration : 0:2:14
25 Responses to “The basic accounting equation”
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November 19th, 2008 at 8:42 pm
With English skills …
With English skills like this I hope it doesn’t transfer onto the notes of financial statements. Also, a Chartered Accountant is a professional designation which requires competency. If you don’t have that competency than your university failed you. I hope I can help you out anyway I can to fill in the gaps.
November 19th, 2008 at 8:42 pm
Accounting just …
Accounting just doesn’t involve math. Every transaction has its own Standards of Financial Reporting Summaries that lay-out lengthy rules and guidelines to account for a transaction. Accounting textbooks as a result have more text and memorization than a standard history textbook. For example, a capital lease requires many tests: its useful life versus lease term, the present value of future cash flows must be 90% of fair value of leased et, etc.
November 19th, 2008 at 8:42 pm
As a 4th year …
As a 4th year accounting student doing consolidated financial statements and removing inter-company transactions, this equation sort of falls out of the total picture. Cash flow hedges is a nightmare I am tackling at the moment too.
November 19th, 2008 at 8:42 pm
the journals are …
the journals are the day-books which record the everyday matters of the business.
November 19th, 2008 at 8:42 pm
assets-liabilities= …
ets-liabilities= capital,
you’re right.
but in the USA they call it Owner’s Equity.
which is the same thing, cause its what the owners has.
November 19th, 2008 at 8:42 pm
aka
…
aka
Assets-liabilities=capital.
BUT GUYS.
theres a TON more stuff to this. this is just the first little equation.
if you’re going to take a uni degree in it, it will be so much more complex.
im only taking it as an AS Level now, and theres LOADS. from reconialiations to depreciation. you have to know the ins + the outs of the system.
but if you want to do it, consult some teachers.
November 19th, 2008 at 8:42 pm
if u doin degree, …
if u doin degree, is it easy and what university u going 2?
November 19th, 2008 at 8:42 pm
w00t, future career …
w00t, future career. ets=Liabilities+Owner’s Equity. This isn’t hard guys, I am taking accounting in HS and at a local CC, very simple.
November 19th, 2008 at 8:42 pm
dude im a freshie …
dude im a freshie and im previously taking this as a Major. any tips on how i could sink in to all this?? tnx men!
November 19th, 2008 at 8:42 pm
Accountancy [1] or …
Accountancy [1] or accounting is the measurement, statement, or provision of urance about financial information primarily used by lenders, managers, investors, tax authorities and other decision makers to make resource allocation decisions between and within companies, organizations, and public agencies. The terms derive from the use of financial accounts.
November 19th, 2008 at 8:42 pm
sik video i am a …
sik video i am a chartered accounted i told my dad that i passed my degree but really failed please help mee!!
November 19th, 2008 at 8:42 pm
AWSOME VIDEO!
AWSOME VIDEO!
November 19th, 2008 at 8:42 pm
Man thats …
Man thats complicated.
November 19th, 2008 at 8:42 pm
I dont get it…I …
I dont get it…I thought it was ets=libialities = capital…..sorry i just started principles of accounting and i wanted to get foundation before progressing
November 19th, 2008 at 8:42 pm
Soon IFRS and US …
Soon IFRS and US GAAP will be merging….soon we will need more forensics accounting more then ever just because of IFRS rules that promotes accounting principles instead of adhering to specific rules like we do in the states.
Best Example IFRS – R&D- research is expensed whereas Development is capitalized and amortized at a rate in which the company sees fit till when the project it completed
US GAAP – Expense it all…no need overstating the financials to make things look good.
November 19th, 2008 at 8:42 pm
what are th so …
what are th so called journals or special jurnals?
November 19th, 2008 at 8:42 pm
Hey, I’m in …
We are in corporate accounting right now, but I pretty much know what this is guy is talking about because we learned about sole-proprietorships. 
Hey, I’m in Accounting now.
Look out world, there is a new Accountant among you
November 19th, 2008 at 8:42 pm
Also gtgrajo thank …
Also gtgrajo thank u soo much I’ll remember the rules. Good luck to me lolz
November 19th, 2008 at 8:42 pm
It was tough in the …
It was tough in the first semester now not tough anymore. Thank u strike66!!
November 19th, 2008 at 8:42 pm
I’m in governmental …
I’m in governmental accounting class now..I miss these days…
November 19th, 2008 at 8:42 pm
What are the basic …
What are the basic types of questions likely on an exam?
E.g. bank reconciliations, control accounts
November 19th, 2008 at 8:42 pm
Normal Balances:
…
Normal Balances:
Assets: Debit.
Liabilities: Credit.
Equity: Credit (but further broken down below)
Owner Capital: Credit.
Owner Withdrawals: Debit.
Revenue: Credit.
Expenses: Debit.
November 19th, 2008 at 8:42 pm
and all you need to …
and all you need to do figure out where each acount falls – under liabilitities…. etc. then by simply always making sure that ets = liabilities and Stockholders equity.. once you have figured out… wala! uve started your accounting, and its quite easy and worth it to learn
November 19th, 2008 at 8:42 pm
btw to balance out …
btw to balance out the equation u need to know what accounts increase by debit or credit – it is as simple as (assets, expenses and dividends = balance increases for debit) all others increase with debit – this is how the equation balances.
so for the above #2 transaction
Jan 2 Prepaid rent expense 4800
Cash 4800
(prepaid rent with Cash)
November 19th, 2008 at 8:42 pm
as long as you can …
as long as you can remember the equation, you can never go wrong. also remember where accounts i.e. ets, liabilities, & capital normally sits. ets is always debit – so if you place the et on credit, it means you’re reducing your et. liabilities and capital sit normally on the right or credit. therefore if you place them on the left or debit, you’re reducing their amounts.