THE ACCOUNTING

EQUATION
 THE ACCOUNTING EQUATION

Assets Liabilities Owner’s Equity

The rights of creditors

The resources
(creditors’ claim) The rights of the owners
owned by a
business (Owners’ claim)
These are the debts of
the business
Business assets are financed by the creditors and the owners
THE ACCOUNTING EQUATION

Assets = Liabilities + Owner’s Equity

100 = 65 + 35
117
? = 62 + 55
100 = 45? + 55

100 = 36 + ?
64
EXERCISES
16,920 15,447

10,905 17,040
EXERCISES
1,030,000
85,500
52,500
 EE 1-2

WORD
PROBLEM
Corona is the owner and operator of Omega, a motivational consulting business. At the end of
its accounting period, December 31, 2019, Omega has assets of $760,000 and liabilities of
$240,000. Using the accounting equation and considering each case independently, determine
the following amounts:
a. Corona, capital as of December 31, 2019.
b. Corona, capital as of December 31, 2020, assuming that assets increased by
$120,000 and liabilities increased by $72,000 during 2020.
c. Corona, capital as of December 31, 2020, assuming that assets decreased by $60,000
and liabilities increased by $21,600 during 2020.
d. Corona, capital as of December 31, 2020, assuming that assets increased by
$100,000 and liabilities decreased by $38,400 during 2020.
e. Net income (or net loss) during 2020, assuming that as of December 31, 2020 assets
were $960,000, liabilities were $156,000, and there were no additional investments or
withdrawals
Corona is the owner and operator of Omega, a motivational consulting business. At the end of
its accounting period, December 31, 2019, Omega has assets of $760,000 and liabilities of
$240,000. Using the accounting equation and considering each case independently, determine
the following amounts:
a. Corona, capital as of December 31, 2019.

ASSET = LIABILITIES + OWNER’S EQUITY

ASSET – LIABILITIES = OWNER’S EQUITY

760,000 – 240,000 = 520,000
Corona is the owner and operator of Omega, a motivational consulting business. At the end of
its accounting period, December 31, 2019, Omega has assets of $760,000 and liabilities of
$240,000. Using the accounting equation and considering each case independently, determine
the following amounts:
b. Corona, capital as of December 31, 2020, assuming that assets increased by $120,000 and
liabilities increased by $72,000 during 2020.

ASSET – LIABILITIES = OWNER’S

EQUITY
Beginning balance 760,000 – 240,000 = 520,000
Changes 120,000 – 72,000 = 48,000
Ending balance 880,000 – 312,000 = 568,000
Corona is the owner and operator of Omega, a motivational consulting business. At the end of
its accounting period, December 31, 2019, Omega has assets of $760,000 and liabilities of
$240,000. Using the accounting equation and considering each case independently, determine
the following amounts:
c. Corona, capital as of December 31, 2020, assuming that assets decreased by $60,000
and liabilities increased by $21,600 during 2020.

ASSET – LIABILITIES = OWNER’S

EQUITY
Beginning balance 760,000 – 240,000 = 520,000
Changes (60,000) – 21,600 = (81,600)
Ending balance 700,000 – 261,600 = 438,400
Corona is the owner and operator of Omega, a motivational consulting business. At the end of
its accounting period, December 31, 2019, Omega has assets of $760,000 and liabilities of
$240,000. Using the accounting equation and considering each case independently, determine
the following amounts:
d. Corona, capital as of December 31, 2020, assuming that assets increased by $100,000
and liabilities decreased by $38,400 during 2020.

ASSET – LIABILITIES = OWNER’S

EQUITY
Beginning balance 760,000 – 240,000 = 520,000
Changes 100,000 – (38,400) = 138,400
Ending balance 860,000 – 201,600 = 658,400
Corona is the owner and operator of Omega, a motivational consulting business. At the end of
its accounting period, December 31, 2019, Omega has assets of $760,000 and liabilities of
$240,000. Using the accounting equation and considering each case independently, determine
the following amounts:
e. Net income (or net loss) during 2020, assuming that as of December 31, 2020 assets
were $960,000, liabilities were $156,000, and there were no additional investments or
withdrawals
If there is no additional investment or
withdrawal during
TYPES OF the year, the
TRANSACTIONS AFFECTING OWNER’S EQUITY
Increase in owner’s equity = net income
Decrease in owner’s equity = net loss

Beginning Capital 100

Add: Investment 80
Add: Profit 10 Net changes
Total 190 Increased
Less: Net loss - by 20
Less: Drawing / Withdrawal (70)
Ending Capital 120
Corona is the owner and operator of Omega, a motivational consulting business. At the end of
its accounting period, December 31, 2019, Omega has assets of $760,000 and liabilities of
$240,000. Using the accounting equation and considering each case independently, determine
the following amounts:
e. Net income (or net loss) during 2020, assuming that as of December 31, 2020 assets
were $960,000, liabilities were $156,000, and there were no additional investments or
withdrawals

ASSET – LIABILITIES = OWNER’S

Increase in owner’s equity = net income
EQUITY
Decrease in owner’s equity = net loss
Ending balance 960,000 – 156,000 = 804,000
Beginning balance 760,000 – 240,000 = 520,000
Changes 200,000 – (84,000) = 284,000
 ASSET – LIABILITIES = OWNER’S
EQUITY
Beginning balance 760,000 – 240,000 = 520,000
Changes 200,000 – (84,000) = 284,000
Ending balance 960,000 – 156,000 = 804,000

Increase in owner’s equity = net income

Decrease in owner’s equity = net loss
PLEASE ANSWER
PROBLEMS 3,4,5