The Accounting Equation Flashcards
1
Q
What is the accounting equation?
A
Assets = liabilities + shareholders equity
2
Q
If a business had £181k in liabilities and £212k in shareholders equity, what is the value of their assets?
A
£181k (liabilities) + £212k (SE) = £393k (assets)
3
Q
What causes negative shareholders’ equity?
A
When their liabilities are worth more than their assets
4
Q
What indicates a negative number in accounting?
A
Brackets around the number
(e.g., “(10,000)” is -10,000)
5
Q
Liabilities = £35k
Equity = (10k)
What is the value of the assets?
A
£25k
(35k - 10k = 25k)
6
Q
What is accumulated deficit?
A
When a company has negative retained earnings (equity)
