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    The financial position of a business refers to its status based on assets, liabilities, and owner's equity. To determine financial position, one lists all assets and assigns values, lists all liabilities and assigns values, and calculates equity by taking the difference between total assets and total liabilities. This relationship can be expressed using the fundamental accounting equation: Assets = Liabilities + Owner's Equity. The chapter instructs doing review questions and exercises to solidify understanding of financial position.

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    The financial position of a business refers to its status based on assets, liabilities, and owner's equity. To determine financial position, one lists all assets and assigns values, lists all liabilities and assigns values, and calculates equity by taking the difference between total assets and total liabilities. This relationship can be expressed using the fundamental accounting equation: Assets = Liabilities + Owner's Equity. The chapter instructs doing review questions and exercises to solidify understanding of financial position.

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    3 views5 pages

    2.1 Lesson

    Uploaded by

    jonathanhartclothes
    The financial position of a business refers to its status based on assets, liabilities, and owner's equity. To determine financial position, one lists all assets and assigns values, lists all liabilities and assigns values, and calculates equity by taking the difference between total assets and total liabilities. This relationship can be expressed using the fundamental accounting equation: Assets = Liabilities + Owner's Equity. The chapter instructs doing review questions and exercises to solidify understanding of financial position.

    Copyright:

    © All Rights Reserved
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    Chapter 2.

    1
    Financial Position
    What is Financial Position?
    The Financial Position of a business is the status of
    the business based on its assets, liabilities, and
    owner’s equity. The concept of financial position is
    basic to the whole system of accounting.
    Your Financial Position
    • Step 1
    List all the things you own. Assign them a dollar value.
    These are assets.
    • Step 2
    List all the things you owe. Assign them a dollar value. These are
    liabilities.
    • Step 3
    Calculate the difference between your assets and liabilities. This
    difference is called equity. Equity is also known as capital,
    owner’s equity, or net worth.
    Fundamental Accounting Equation
    A – L = OE (Assets – Liabilities = Owner’s Equity

    • This equation is useful to calculate equity.


    However, it is most commonly shown as below:

    A = L + OE
    Assets = Liabilities + Owner’s Equity

    ** REMEMBER THIS!!!!! **
    Homework
    • Do the Review questions on the bottom of page 19
    • Please do Exercises 1-6 on page 20
    • Due Tuesday!

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