 Concept 39: Accounting Equation – Basic and Expanded Forms | IFT World
101 Concepts for the Level I Exam

# Concept 39: Accounting Equation – Basic and Expanded Forms Basic accounting equation

Assets = liabilities + owner’s equity

You are given the following information about company ABC.

Assets                                     $100 million Liabilities$80 million

Calculate owner’s equity.

Solution:

Owner’s equity          = assets – liabilities

= $100 –$80 = $20 million Expanded version of the accounting equation Assets = liabilities + contributed capital + beginning retained earnings + revenue – expenses – dividends You are given the following information about company XYZ. (in millions) Liabilities$80

Contributed capital                                 $5 Beginning retained earnings$15

Revenue earned during the year         $20 Expenses incurred during the year$10

Dividends declared for the year           $2 Calculate the total assets at the end of the year. Solution: Assets = 80 + 5 + 15 + 20 – 10 – 2 =$108 million