Accounting

As you have learned in this week’s readings the Accounting Equation is Assets = Liabilities + Owners’ Equity.  Is the accounting equation true in all instances?  Provide sample transactions from your own experiences to demonstrate the validity of the Accounting Equation.

What does the term account mean?  What are the different classifications of accounts?  How do the rules for debits and credits impact accounts?  Please provide an example of how debits and credits impact accounts.

[Company Name]        Balance Sheet
Date:

Assets        2012    2011
Current Assets
Cash     12,500
Accounts receivable
Inventory
Prepaid expenses
Short-term investments
Total current assets         12,500      –
Fixed (Long-Term) Assets
Long-term investments     14,000
Property, plant, and equipment     25,000
(Less accumulated depreciation)     (4,500)
Intangible assets
Total fixed assets         34,500      –
Other Assets
Deferred income tax
Other
Total Other Assets         –      –

Total Assets         47,000      –

Liabilities and Owner’s Equity
Current Liabilities
Accounts payable     17,000
Short-term loans     4,000
Income taxes payable     6,000
Accrued salaries and wages     2,500
Unearned revenue     5,000
Current portion of long-term debt     1,000
Total current liabilities         35,500      –
Long-Term Liabilities
Long-term debt     6,000
Deferred income tax     1,000
Other
Total long-term liabilities         7,000      –
Owner’s Equity
Owner’s investment     1,000
Retained earnings     3,500
Other
Total owner’s equity         4,500      –

Total Liabilities and Owner’s Equity         47,000      –
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Accounting Equation

Accounting Equation is Assets = Liabilities + Owner’s Equity
Assets    Liabilities    Owner’s Equity
Assets    Current + Long-Term Liabilities    Owner’s Equity
47,000      42,500      4,500
47,000      47,000