The accounting equation=assets=capital+liabilities

Assets are items belonging to the business and used

in starting the running the business…
Liabilities are sums of money owed by the business
to outsiders e.g bank overdraft or loan
Tax to government authorities
Credit purchases as well

The business is a separate entity from its owner this

just says that
A business can owe money to its owners as they
different persons
The assets and liabities of the business are separate
from the owner

Fundamental accounting rule is assets and iabilities

should always be equal…..
Also note that the business owes the owner for the
capital she has contributed into the business
Capital is the investment of money with the
intenstion of earning a return capital is a liability to
a business then.

Profit like capital belongs to the owner of the

business it belongs to neelim sultun exactly
Also as long as the business does not pay anything
to the owner the retained profit became part of the
owners capital

Assets
Stall 1800
Flowers +plants 0
Cash 50 +900 950
2750

The accounting equation 2 as long as business

retains profits owes nothing to owner
Capital introduced +retained profits=liabilities

Assets(1800)
Stock
Cash is 50+900(950)=2750
Capital at start+retained profits(2500)+250=2750

Net assets are total assets-total liabities ame thing

for capital total assets -total liabiltes
Net assets represent capital introduce +retained
profits as well
Net assets total assets -total liabilities
capital at start +at end=retained proft which is an
increase in net assets

Amounts of money taken of the business by the

owner are drawings
Profit earned (it is a surplus on sale of
flowersreamils after another has been utilized on
resources)
Profit retained is kept within its account
Double entry means that every transaction has the
dibit and creditside
Debit side may be an increase in expenses’
In assets
A decrease in liability

Credit side may be

An increase in liability
An increase in income a decrease in assets
Dual effect changes in assets include changes in
capital and also liabilities
Double entry is called so because every transaction
occurs twice in the accounting system……..
Double entry gives into account to make sure that
debit entries are equal to credit entries
Asset liability income and expense has a ledger
account

Capital expenditure is the expenditure spend on

non current assets or an improvement in their
earing capacity
The total amount capital expenditure is not
deducted from earings
It is deemed expenditure that brings benefits to the
business over more than one accounting period

Revenue expenditure is expenditure that is

incuured either on the purpose of trade of the
business or to maintain the existing earning
capacity of non current assets
If capital expenditure is treated at revenue profit
will be understated and if revenue is treated like
capital it will be overstated
Revenue expenditure used in the accounting period
which they are purchased
Capital revenue purchase or improvement of non
current assets