I understand the accounting equation is: Liabilities + Stock Holders’ Equity = Assets How do you prepare the four financial statements using the accounting equation? Statements are: income statement retained earnings statement balance sheet statement of cash flow Do you have a helpful reference with step by step instruction and examples?
I understand the
Liabilities + Stock Holders’ Equity = Assets
How do you prepare the four financial statements using the accounting equation?
Statements are:
- income statement
retained earnings statement- balance sheet
- statement of cash flow
Do you have a helpful reference with step by step instruction and examples?
The basic Accounting Equation is Assets = Equity + Liabilities
Assets are the resources owned by the company. They are acquired with an intention to sell or to facilitate the sale. They carry future economic value. Example: Cash, Inventory, Plant and Machinery, Land and Building.
Liabilities are the financial debts or obligations that arise in the course of business operations. Liabilities payable within a year of the balance sheet date are known as Current liabilities and the balance is known as Long-Term Liabilities.
Equity includes the value of Shareholders Common Stock, Preferred Stock and the value of retained earnings.
Preparation of Income Statement based on Accounting Equation
Income Statement reports the profit earned or the losses incurred for the period. Profit/Loss is reported by considering the Incomes and Expenditures for the period.
Preparation of Statement of Retained Earning based on Accounting Equation
Statement of retained earnings records the changes in the retained earnings for the current period.
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