Chapter 1, Problem 11QS

To determine

Concept Introduction:

Assets: These are resources which the company owns and will generate future economic benefits. The assets are categorized into fixed asset which will help in generating revenues for long period of time and examples is plant and machinery, building , equipments etc and current assets are resources which will be converted into cash within one year examples are accounts receivable , inventory

Liabilities: These are amounts which the company has to pay to external stakeholders like creditors for credit purchases, banks for loans taken

Owner equity: The amount contributed by owner to the company by way capital infusion , the purchase of equity shares by shareholders , the net profits are part of owners equity

Accounting Equation: In accounting all transactions will always have debit and credit entry and always the total amount of debit will be equal to credit amount for every accounting equation. The accounting equation can be written as follows

  $\begin{array}{l}\text{Assets = Liabilities + Equity}\\ \end{array}$

The accounting equation can be more detailed if equity component is detailed and can be shown as follows

Assets = Liabilities + Equity(owner capital - owners withdrawal +revenues -expenses)

To prepare:

The transactions analysis