THE ACCOUNTING EQUATION

UND: Identify what the accounting equation is.

• Assets= Owners Equity - Liabilities

• Liabilities= Owners Equity + Assets

• Assets= Owners Equity + Liabilities

• Owners Equity= Assets + Liabilities

REM: Define what an asset is

• The debt of the business.

• The profit accumulated in the business.

• The income and expenditure within the business.

• The possessions owned and used by the business.

CRE: Make a list fixed assets that is found in a business.

• Land and buildings, Equipment, Vehicles

• Capital, Drawings, Income

• Trading inventory, Bank, Debtors

• Loan Deposit, Interest

ANA: Classify the Owner's Equity accounts from below

• Debtors control/ Petty cash

• Land & Buildings/ Equipment

• Interest on loan/ Trading stock

• Capital/ drawings/ income/ expenses

EVA: Differentiate between Owners Equity and Liabilities

• Owners Equity represents the possessions in a business and Liabilities represents income in the business.

• Owners Equity represent the debts in a business and Liabilities represent the business's net worth.

• Owners Equity represents the net worth of a business and Liabilities represent the debt in a business.

• Owners Equity represent credit and Liabilities represent expenses.

APP: Solve the equation: OE= R989 000 L= R565 750 A= ?

• Assets= R1 554 750

• Assets= R423 250

• Assets= R1 750 554

• Assets= R1 455 057

REM: Describe the effect of the accounting equation on Assets.

• Assets decrease on the debit side and increase on the credit side.

• Assets increase on the debit side and decrease on the credit side.

• Assets increase on the debit side as well as the credit side.

• Assets decrease on the debit side and on the credit side.

REM: Define what a sole trader is

• A business whose name ends in Pty [Ltd].

• A business with more than 1 owner.

• A business with one owner who takes full responsibility.

• A business with a large number shareholders.

ANA: Differentiate between credit sales and credit purchases.

• Credit sales= selling on credit & Credit purchases= buying on credit

• Credit sales= buying on credit & Credit purchases = selling on credit

• Credit sales= selling for cash & Credit purchases= buying with cash

• All of the above

APP: Indicate what the two control accounts are:

• Capital and Drawings

• Debtors control and Bank

• Sales and Creditors control

• Debtors control and Creditors control