The Accounting Equation

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The Accounting Equation
All aspects of accounting is based off of the fundamental principle of Assets = liabilities + owners’ equity. Each of these elements has their own unique function within the accounting equation. In the accounting equation, each side of the equation balances with the other at all times. This equation is commonly used on the balance sheet.
Assets are anything of value that a company owns, which includes cash as well. Several types of assets exist, such assets are as follows: Current, investments, capital, and intangible. These assets are all combined for a company’s total assets. Current assets are assets with dollar amounts that continually change. Such assets may include cash, inventory, raw materials, and raw materials. Investments can be owned by companies which may include securities such as stocks and bonds. Capital assets are permanent things that a company may own. This would include land, buildings, vehicles, and equipment. Other things such as computers, appliances, and furniture can also be considered capital assets as long as they are being used and not being sold. Intangible assets include patents, copyrights and other non-material assets that have value.
Liabilities are anything a company owes to businesses or other people; there are two types of liabilities. Current liabilities are liabilities that are usually paid within a year. Such liabilities consist of money owed to vendors, suppliers, employees, short-term loans, and other bills. Long term liabilities are liabilities that extend past a year. This may include bills such as a mortgage.
Owners’ Equity According to "Dunn & Bradstreet Credibility Group" (n.d.), "Owners' equity, also called capital, is any debt owed to the business owners. For example, if you invested $50,000 of your savings to start a business, that amount is recorded in…...

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