B explain the accounting equation in its basic and expanded forms; Flashcards
Explain the accounting equation in its basic and expanded forms.
1
Q
What relationship does the basic accounting equations convey?
A
The relationship between A, L, SE as A=L+SE, rather, the BS elements
2
Q
How does one ‘expand’ the basic accounting equation?
A
Expand OE to contributed capital + ending retained earnings
3
Q
How does one expand the expanded form?
A
By expanding ending retained earnings as
…+contributed capital+Beginning retained earnings+revenue-expenses-dividends
4
Q
What does A=L+OE reveal?
A
It reveals from which sources claims on assets reside
5
Q
What does OE equation reflect?
A
The fundamental origins of OE
6
Q
Ending RE calc =
A
Ending RE = Beg + Net Inc, Revenue - expenses, - Div
7
Q
State the fundamental origins of OE
A
contributed capital + beg. RE +Rev - exp - div
