Good day students, in today's lesson we will be talking about the Accounting Equation and its effect on the company's Assets, Liabilities and Owner's Equity. 

Before we go an further, let us recap on the definitions of the Assets, Liabilities and Owner's Equity. 

1.  Assets- an asset is any resource owned or controlled by a business or an economic entity. It is anything that can be used to produce positive economic value

2. Liabilities - is defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events. 

3. Owner's Equity-  refers to the owner's interests, stake in the company. 


The below picture illustrates Accounting Equation, and also show the Accounting Equation which is: ASSETS= LIABILITIES + OWNER'S EQUITY.



NOTE: The below video will explain Accounting Equation in detail and also give examples which will show the effect on Assets, Liabilities and Owner's Equity. Please watch the video and if you have any questions, please contact me.




Click on the following link and watch the videos to assist you in completing your assigned task in Accounting Equation:

Accounting equation with journals and ledger - YouTube



                             ACCOUNTING EQUATION


  1. I believe that everyone has watched and understood the above video as it will be a much great help when completing this task. 
  2. In previous classes we did the Accounting Equation, but only focusing on Assets, Liabilities and Owner's Equity, and now we have added two columns: account to be debited and account to be credit. 
  3. You are no stranger to debiting and creating accounts, as we have discussed the Double Entry Principle. A quick refresher on the Double Entry Principle; for every debit entry, there must be a corresponding credit entry. 



                                                                  ACTIVITY 2.

For each of the transactions indicate the accounts affected and the effect on the accounting equation.

For the purpose of this activity, I will show you ladies and gentlemen on how to action this activity with the first transactions. 


Before you do the task, these are the learning outcomes: 

  • Record transactions in the accounting equations
  • Apply the Double Entry Principle 
  • Post to the General Journal 




A/C Debited

A/C Credited




Owner’s Equity



The owner invests personal cash in the business.









The owner withdraws business assets for personal use.







The company receives cash from a bank loan.







The company repays the bank that had lent money to the company.







The company purchases equipment with its cash.







The owner contributes her personal truck to the business.






(35 Marks)



  • Asset, is the company bank accounts and assets (bank) increases on the debit side
  • Owner's Equity- The owner invested money into the business, this is a Capital contribution and Capital increases on the credit side.
  • Liabilities- no effect because the company did not borrow and monies. 




STEP 1: 

  • Read through the introductory content and get an understanding of the topic. 
  • Also, click on the provided link below the introduction content and watch the video in order to gain more knowledge on the topic, Accounting Equation.

STEP 2: 

  • Go to the Task section and follow the given instructions, and you are required to watch the video to assist you with completing your assigned task. 

STEP 3: 

  • Before you commence with your assigned task, click on Evaluation to see how will you will marked.
  • Complete the task and use the evaluation table to guide. 

STEP 4: 

Once you have completed your assigned task, please submit to my email address: 

And after completion of your assigned task, read through the Conclusion section and watch the video which sums the lesson 




                                                            EVALUATION- ACCOUNTING EQUATION


Please note, the assigned task  is for 35 marks. 

Use the below table as a guide when completing your assigned task: 










Ability to critically analyse and understand business transactions.

Understands some of the work, but some transactions are recorded incorrectly.

No understanding.


All 18 Journal Entries recorded correctly- debit and credit accounts.

Some of the transactions are recorded, but incorrectly.

Attempted, with limited understanding of the accounting concept.


Given the specific scenario, student analyses business transactions to determine the effect of the transaction on the accounting equation.

Student analyses some of the business transactions but applied the Double Entry Principle incorrectly for some the transactions.

Adjusted transactions incorrectly.



In this lesson we have learnt about the application of the Double Entry Principle and how to apply it  on the accounting equation. 

After analysing the above transactions, we can observe how they affected different parts of the accounting equation. Knowing how entries affect the accounting equation is important for businesses because one simple mistake can cause a balance sheet or income statement to be over or understated.

Please watch the following videos as they will assist you in further understanding the accounting equation. 

The first video is similar to your assigned task, please watch and review your work;

Accounting equation with journals and ledger - YouTube


This video illustrates accounting equation on the financial statements of the company.

The Accounting Equation - YouTube


Teacher Page



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