Accounting Equation Homework Help

Accounting can be difficult too!

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Students must get familiar with the following facts about accounting equation first:

Accounting equation is a method that defines that the company’s assets are equal to its liabilities, along with payment which is made to the shareholders of that company. The formulation for this equation is:

Total Assets = Total Liabilities + Shareholder Equity

A company does many different kinds of purchases and/or sales which actually affects both the sides of the equation, simultaneously, or even keeps the calculation same on the same side of the equation. For example, a company wants to make a payment of Rs. 100,000 to the bank. This company can either pay the bank by cash (assets to liabilities), or can take up a new loan to pay-off the earlier loan (liability to liability). In either of the cases, the calculation of both the sides will remain the same.

There are two main important points which are to be taken care of:

  1. Total Liabilities:

To find out total liabilities, it is very much important to know the short-term (or current) and long-term liabilities of the company. The total of these two liabilities will be the actual figure which will help in completing the equation

  1. Shareholder equity:

To get the figure in order to find out the equation, the following method is to be used:

Share capital + retained earnings – Treasury shares

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