The accounting equation underlies the process used to capture the effect of economic events. The equation (Assets = Liabilities + Owners’ Equity) implies an equality between the total economic resourcesof an entity (its assets) and the total claims against the entity (liabilities and equity). It also implies thateach economic event affecting this equation will have a dual effect because resources always must equalclaims.
The accounting equation underlies the process used to capture the effect of economic events. The equation (Assets = Liabilities + Owners’ Equity) implies an equality between the total economic resourcesof an entity (its assets) and the total claims against the entity (liabilities and equity). It also implies thateach economic event affecting this equation will have a dual effect because resources always must equalclaims.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter4: The Balance Sheet And The Statement Of Shareholders' Equity
Section: Chapter Questions
Problem 1RE
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The
of an entity (its assets) and the total claims against the entity (liabilities and equity). It also implies that
each economic event affecting this equation will have a dual effect because resources always must equal
claims.
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