Author: fbs0304

Elements of the Accounting Equation: i.) Assets: Assets are those resources that are owned by the firm and are expected to generate future economic benefits. In other words, assets comprise cash, inventories,... Read More

The accounting equation is the basic formula on which the double entry bookkeeping system is formulated. It portrays the value relationship between the amount of assets, liabilities, and owners' equity... Read More

Example 2: Collection of Sales on Account When a firm sells goods on account, it will have a two-way effect: 1. Increase in accounts receivable: The firm is owed money by the... Read More

Example 1: Purchasing Equipment for Cash A company purchases equipment for cash costing $5,000. This will create two impacts: 1. Increase in assets: Equipment is an asset and its value has increased... Read More

There has to be an equal and offsetting credit entry for every debit entry. Such a balance will make sure that the accounting equation remains intact, meaning that financial statements... Read More

There are two types of accounts under double-entry accounting i.) Debit accounts: These include assets and expenses. Whereas a firm buys an asset or incurs an expense, it does a debit... Read More

The Principle of Double-Entry The double-entry accounting principle postulates that all financial transactions can be classified into two: one that increases something and another that decreases something else. This principle guarantees... Read More

The fundamental principles of accounting, that is, the principle of double entry and the accounting equation, ensure that the financial books are kept in very good order. For this reason,... Read More

Conclusion Accounting concepts include the double-entry principle and the accounting equation. They make financial statements accurate, reliable, and authentic. All transactions are recorded as a debit and a credit, making books... Read More

3. Reliability: Double entry bookkeeping builds reliable financial statements, which are good tools for decisions at all levels by managers, investors, and regulatory bodies. 4. Transparency: Double-entry accounting helps businesses to... Read More