revenues and expenses

Metro paid a total of $900 for office salaries. Metro performed work and will receive the money in the future. Our popular accounting course is designed for those with no accounting background or those seeking a refresher. Full BioAmy is an ACA and the CEO and founder of OnPoint Learning, a financial training company delivering training to financial professionals. She has nearly two decades of experience in the financial industry and as a financial instructor for industry professionals and individuals. Is not authorised by the Dutch Central Bank to process payments or issue e-money. An application under Electronic Money regulations 2011 has been submitted and is in process.

As long as an organization follows the equation, it can report any type of transaction, even if it is fraudulent. Accountants and members of a company’s financial team are the primary users of the accounting equation.

Rearranging the Accounting Equation

Use the balance sheet equation when setting your budget or when making financial decisions. Company credit cards, rent, and taxes to be paid are all liabilities.


The new purchased new asset for $8,500 and paid cash. We want to increase the asset Equipment and decrease the asset Cash since we paid cash. The new corporation purchased new asset for $5,500 and paid cash. The new corporation received $30,000 cash in exchange for ownership in common stock (10,000 shares at $3 each). Now that you understand the parts of the accounting equation, let’s talk about how it works. On January 1st, 2020, Sherry took out the money from her savings for $100,000 to start her skincare business. Determine the asset, liability, and equity value of her skin clinic as of January 1st, 2020.

The Accounting Equation (with Real Life Examples)

Good examples of assets are cash, land, buildings, equipment, and supplies. Money that is owed to a company by its customers, which is known as accounts receivable, is also an asset. Adding up the sum of liabilities and the total owners/shareholders equity, which will equal the sum of the assets. This increases the inventory account and increases the accounts payable account. Thus, the asset and liability sides of the transaction are equal.

sum of liabilities

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