The Basic Accounting Equation

Balance Sheet

Assets

Liabilities

Equity

Income

Statement

Revenue

Expense

Net Income

The Language of Accounting How we speak

Study using a dictionary

• Make a list of words from the last slide.

• Look up each word in the dictionary

• Study a word and write down its meaning on

an index card

• You will add to each card as we learn more

about the words meaning.

The Accounting Equation

How many Coconuts do you have?

The Equation

•

• A = Assets

• L =

Liabilities

• OE =

Owners

Equity

Assets:

Make a list of your Assets.

What are the total assets?

Total Assets

Assets are what you own

Liabilities

• Visa/MC amounts

owing

• Car Loan

• Student Loan

• Line of Credit

• Mortgage

Make a list of your liabilities

What are the liabilities?

Equity

What is the Equity Amount?.

Total Liabilities & Equity

Assets are equal to Liabilities & Equity

Assets minus Liabilities = Equity

Can you determine your Equity.

Add up Assets Add up

Liabilities

Find the

difference

between assets

& Liabilities.

This equals

your Equity!

The Balance • The equation MUST always balance!

Now that we have our starting point, we can begin to add

revenue and deduct expenses to see how our Equity will

increase or decrease..

Now, lets see how Net Worth

changes

• You start by adding accounts

• Then tracking amounts you earn

• Track amounts to be spent.

• We can see our Net Worth

increase or decrease

Revenue

Amounts that you earn, that are subject to

income tax.

• Wages

• Income from your second job

• Interest or dividends from investments

Expenses

The amounts that you pay from your income for

current bills every month.

• Heat

• Hydro

• Telephone

• Rent

• Cable

• Entertainment

• Clothing

How Equity Changes

Add Revenue Minus Expenses

The New Updated Balance Sheet

Always learn with the help of a

friend

Reference Sheet

Basic Accounting Equation Versions

http://www.foxstone.com.au/accounting-

wallchart.html July 1, 2013

Basic Liabilities Equation

http://www.motherjones.com/kevin-

drum/2009/05/taxonomy-consumer-credit

July 1,2013

Canadian Money http://www.ivany.org/cheap-

smartphone-plans-in-canada/ July 1, 2013

House & Car

http://rightwaysrichard.blogspot.ca/2013/01/is

-having-car-still-symbol-of-freedom.htmlJuly

1, 2013

Boat

http://www.ultimatemarine.ca/TRACKERBOA

TS/tabid/254/Default.aspx July 1, 2013

Investment Icon

http://cargocollective.com/samcoomber Juy

1, 2013

Computer http://www.computersandthings.ca/

July 1 2013

Reference Sheet 2

Product Liability

http://www.richardmolin.com/specialty/produc

t-liability.html July 6, 2013

Payday loans

http://www.getrichslowly.org/blog/2011/09/12/

how-much-do-we-owe-others-and-when-

should-we-walk-away/ July 6, 2013

Debt

https://www.facebook.com/WorldOfDeception

July 6, 2013

Taxes http://mattersofopinion.net/2011/05/ July

6, 2013

Tax Bill http://www.golocalprov.com/news/new-

schillings-38-studios-to-owe-395000-tax-bill-

in-providence/ July 6 2013

Reference Sheet 3

Equity http://www.roninmortgage.com/is-a-

home-equity-loan-right-for-you/ July6, 2013

Money Tree

http://insidetradellc.com/blog/private-equity-

investing-a-growing-market/ July 6, 2013

Money Grows

https://www.google.ca/search?hl=en&site=im

ghp&tbm=isch&source=hp&biw=1391&bih=7

00&q=Equity&oq=Equity&gs_l=img.3..0l10.29

34.4328.0.13771.6.5.0.1.1.0.116.542.1j4.5.0..

..0...1ac.1.19.img.U53mfbFrYOo#facrc=_&im

gdii=_&imgrc=CoLClR8QW9yN2M%3A%3BV

KSUnfbrjSe69M%3Bhttp%253A%252F%252

Fevca.eu%252Fwp-

content%252Fuploads%252F2012%252F11

%252Fgrowing-sprout-

money.jpg%3Bhttp%253A%252F%252Fevca

.eu%252F2012%252F11%252F15%252Fpriv

ate-equity-shown-to-benefit-

economy%252F%3B250%3B220 July6. 2013

Reference Sheet 4

Piggy bank with 50 dollars

https://www.google.ca/search?hl=en&site=im

ghp&tbm=isch&source=hp&biw=1391&bih=7

00&q=Equity&oq=Equity&gs_l=img.3..0l10.29

34.4328.0.13771.6.5.0.1.1.0.116.542.1j4.5.0..

..0...1ac.1.19.img.U53mfbFrYOo#facrc=_&im

gdii=_&imgrc=HkgFNyjCleOnXM%3A%3BGl

R5Hrh37Q43MM%3Bhttp%253A%252F%25

2Fwww.mariecopeland.ca%252Fimages%25

2Fbest-home-equity-

loan.jpg%3Bhttp%253A%252F%252Fwww.m

ariecopeland.ca%252Fbest-home-equity-

loan.html%3B380%3B285 July 6, 2013