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Accounting - The accounting equation

The accounting equation

The accounting equation

This is another strategy, which is useful when dealing with balance day
adjustments. This particular approach emphasises the importance of
recognising the dual effect of transactions on the accounting equation.

The accounting equation represents a state of balance. Initially assets
are equal to liabilities plus owner's equity (proprietorship). Once the
business commences operations this equation extends to Assets + Expenses =
Revenue + Liabilities + Owner's equity (proprietorship).

This may be presented in the form of a playground see saw. If the see saw
is to be fun it must be kept in balance. There must be equal weight at each
end. The left hand side of the seesaw is the debit side and the right hand
side is the credit side. Any decrease in the debit side of the seesaw must
be matched by a decrease in the credit side, or an increase in the debit
side. All changes must be of equal effect.

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