Accounting Equation Calculator
This balance sheet equation is used to calculate the relationship between your business assets, liabilities, and equity based on basic and expanded accouting information.
Formula To Calculate Accounting Equation :
The accounting equation is very important. It represents the relationship between the assets, liabilities, and owners equity of a person or business.This is also known as the Accounting Equation or The Balance Sheet Equation.
Assets are the economic resources belonging to a business.Assets is calculated as follows:
Assets = Liabilities + Capital
Cash in hand, Cash at Bank, Receivables, Inventories, Depreciable assets, Growing Crops, Land, Investments, Goodwill, Patents & Trade Marks, Prepaid Expenses, Outstanding Incomes, etc.
Liabilities are the debts owed by the firm.Liabilities is calculated as follows:
Liabilities = Assets - Capital
Trade Creditors, Payables, Creditors for Expenses, Loans from Bank or Other persons or institutions, Bank Overdraft, etc.
Capital is the value of the investment in the business by the owner(s).Capital is calculated as follows:
Capital = Assets - Liabilities
Formula To Calculate Expanded Accounting Equation :
The expanded accounting equation shows the relationships among the accounting elements. In the expanded accounting equation, the capital portion is broken down into several components: contributions, withdrawals, income, and expenses.
Assets = Liabilities + Contributed Capital + Beginning Retained Earnings + Revenue - Expenses - Dividends
Contributed Capital, capital provided by the original stockholders. This is also known as Paid-In Capital.
Beginning Retained Earnings, earnings not distributed to stockholders from the previous period.
Revenue, whats generated from the ongoing operation of the company.
Expenses, costs incurred to run operations of the business.
Dividends, earnings distributed to the stockholders of the company.