![]() The owners' claim is referred to as 'capital', whereas outsider's claims are referred to as 'liabilities.' Since every part of this equation relates to the balance sheet, this equation also states a company's financial condition at a given date. ![]() In general, the owners and outsiders provide the resources in the company. These outsiders are those who are offered funding to fund those resources. This ensures that a company's finances will correlate with the outsider's claims at any point in time. ![]() The accounting equation states that enterprise's assets are, therefore, equal to the owners and outsider's claims. The accounting equation is thus expressed as of the owner's claims and those of outsiders. The basic equation of accounting reflects the dual-entry concept of claims, i.e.
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