Accounting Equation and Related Concepts

Front

Accounting equation for balancing a piggy bank.

Back

Assets = Liabilities + Equity

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Back

Front

How to calculate total liabilities using the accounting equation?

Back

Liabilities = Assets - Equity

Front

Olivia and Avery discover a chest of gold coins (assets) that increases in number, while their bag of stones (liabilities) remains the same. What happens to their treasure (equity)?

Back

Their treasure increases

Front

Identify an example of a liability from the following: A bank loan, Accounts payable, Wages payable

Back

A bank loan

Front

Mia and Noah discover a company's liabilities are greater than its assets. What does this reveal about the company's equity?

Back

The equity is negative

Front

What happens to Mia's equity when she incurs expenses for her lemonade stand?

Back

Expenses decrease equity because they reduce net income, which lowers retained earnings.

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Back

Front

Explain the relationship between retained earnings and the accounting equation.

Back

Retained earnings are part of equity, representing accumulated profits that have not been distributed as dividends.

Front

How do accounts payable fit into the accounting equation?

Back

Accounts payable are a liability, representing money the company owes to suppliers.