Tovah Hunter: The Use Of The Accounting Equation System

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The Use of the Accounting Equation
By Tovah Hunter

The USE OF THE ACCOUNTING EQUATION page 1

The four core financial statements are Balance sheet, income statement, statement of retained earnings, and cash flows. There are three important financial statements; when combined together should show an equality balance sheet. Adaptation in the accounting equation system provides analyst logical explanations for making financial decisions based on an entity financial statement. However, these financial statements are objective, that historical cost must be present in order to determine a reliable and truthful report. To gain a better understanding of the accounting equation
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Again, we can see the use of a core financial statement, the balance sheet for Company B [1.4 what was the equity balance for Company B at December 31, 2008?] To gain equality, the balance sheet, must provide an equation assets – liabilities = equity balance. Owners’ equity has seemingly become an important value on an entity financial statement, particularly the business entity. The equity balance for Company B the month December 31, 2008 values $31,000.

Company B
Balance Sheet
December 31, 2009

Assets $60,000
Liabilities

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