CHAPTER 3

ACCOUNTING
FOR A BUSINESS
 Accounting Equation

The elements of the accounting or balance

sheet equation are:
• Assets - resources (items) with a dollar value
that are owned by a business;
• Liabilities - what a company owes to its non-
owners for assets, products or services; and
• Capital - what the owner invests into the
business.
 Accounting Equation

• The accounting equation shows the

relationships of the elements in accounting.
• To find Capital: the equation will be Capital
= Assets + Liabilities
• To find Assets: the equation will be Assets
= Liabilities + Capital
• To find Liabilities: the equation will be
Liabilities = Assets – Capital
 Balance Sheet
(Horizontal Format)

N. Marcano Name of Organization

Balance Sheet Name of Statement
As at January 5, 2005 Date

ASSETS $ Financed by $

Equipment 20 000 Capital at start 200

000
Stock 3 000
Bank 177 000
200 000 200 000
 Balance Sheet
(Vertical Format)
N. Marcano Name of Organization
Balance Sheet Name of Statement
As at January 5, 2005 Date

ASSETS $
Equipment 20 000
Stock 3 000
Bank 177 000
200 000
Financed by

Capital at start 200 000