Ludivinia Victorino, a seasoned photographer, embarked on her professional journey by

inaugurating her studio on July 1. 📸🎉

As she begins her creative endeavor, let’s delve into the financial aspects of her studio. The

accounting equation serves as the bedrock of financial management. It states:

Assets=Liabilities+Equity

Here’s a breakdown of the key components:

1. Assets: These are the resources controlled by the business that result from past events and

can provide future economic benefits. For Ludivinia, her assets include the photography

equipment she acquired and the cash she deposited in the bank account for her studio.

2. Liabilities: These represent the present obligations of the business that arise from past

events. In Ludivinia’s case, any outstanding payments or debts would fall under

liabilities.

3. Equity: Also known as owner’s equity or net worth, this is the residual interest in the

assets after deducting liabilities. It reflects the owner’s investment and any income earned

during the year. Conversely, it decreases when the owner withdraws funds or incurs

expenses.

Now, let’s apply this equation to Ludivinia’s transactions:

1. Deposited P146,200 in a bank account under the business name Victorino Photo

Profiles. This deposit contributes to the asset side of the equation.

2. Bought new photography equipment on account from Canon Equipment, P71,210.

This transaction increases the asset side (equipment) and introduces a liability (account

payable to Canon Equipment).