Student : Kamv'elihle James
Student Number: 217086314
Course: Post Graduate Certificate in Education
Introduction
W E L C O M E T O T H E 1ST L E S S O N O F A C C O U N T I N G E Q U A T I ON F O R B E G G I N E R S !
What is an accounting equation?
The accounting equation is a proposition that states that a company's assets must equal its liabilities plus its equity.
Why is it important to prepare an accounting equation?
The accounting equation is crucial because it displays the relationship between the three elements of a balance sheet: assets, liabilities, and equity. When a company's assets grow faster than its equity, everything else stays the same. Similarly, increasing obligations reduces equity, whereas decreasing liabilities (for example, by paying off debt) increases equity.
Kindly view the video below, it will help you to clearly identify whether the concept is an income, expense, fixed asset, current asset, non-current liability, or current liability. Also, how to record transactions in the accounting equation. Stay Tuned!!
Task
Lindene is the new owner of Linz Boutique, she is asking you as the accountant to explain to her what are the basic concepts of accounting and how to construct an accounting equation. After completing the task below, she must be able to tell which concept is an income, expense, fixed asset, current asset, non-current liability, or current liability. Secondly, she must be able to construct an accounting equation.
Kindly follow the below link for assistance: https://www.keynotesupport.com/accounting/accounting-assets-liabilities-equity-revenue-expenses.shtml
Activity 1
Complete the following table. Indicate whether the concept is an income, expense, fixed asset, current asset, non-current liability, or current liability.
|
1 |
VEHICLE |
--------------------------------------------------------------------------------------------------- |
|
2 |
CAPITAL |
--------------------------------------------------------------------------------------------------- |
|
3 |
COST OF SALES |
--------------------------------------------------------------------------------------------------- |
|
4 |
PACKING MATERIAL |
--------------------------------------------------------------------------------------------------- |
|
5 |
BANK OVERDRAFT |
-------------------------------------------------------------------------------------------------- |
|
6 |
FIXED DEPOSIT |
-------------------------------------------------------------------------------------------------- |
|
7 |
DRAWINGS |
--------------------------------------------------------------------------------------------------- |
|
8 |
EQUIPMENT |
--------------------------------------------------------------------------------------------------- |
|
9 |
STATIONARY |
--------------------------------------------------------------------------------------------------- |
|
10 |
LOAN |
-------------------------------------------------------------------------------------------------- |
|
11 |
FAVOURABLE BANK BALANCE |
--------------------------------------------------------------------------------------------------- |
|
12 |
SALES |
--------------------------------------------------------------------------------------------------- |
|
13 |
LAND AND BUILDING |
---------------------------------------------------------------------------------------------------- |
|
14 |
CASH FLOAT |
--------------------------------------------------------------------------------------------------- |
|
15 |
DEBTORS CONTROL |
--------------------------------------------------------------------------------------------------- |
|
16 |
TRADING STOCK |
--------------------------------------------------------------------------------------------------- |
|
17 |
INTEREST ON FIXED DEPOSIT |
-------------------------------------------------------------------------------------------------- |
|
18 |
CREDITORS CONTROL |
--------------------------------------------------------------------------------------------------- |
|
19 |
INTEREST ON LOAN |
--------------------------------------------------------------------------------------------------- |
|
20 |
SERVICE RENDERED |
--------------------------------------------------------------------------------------------------- |
(20)
Activity 2
Complete blank spaces below:
|
Nr |
Assets |
Owners’ Equity |
Liability |
|
1 |
R380 000 |
--------------------------------------------- |
R120 000 |
|
2 |
----------------------------- |
R648 000 |
R240 000 |
|
|
R810 000 |
R520 000 |
------------------------------------------------ |
|
4 |
----------------------------- |
R140 000 |
R60 000 |
|
5 |
R735 000 |
--------------------------------------------- |
R40 000 |
|
6 |
R450 000 |
R380 000 |
------------------------------------------------ |
(6)
Activity 3
|
1 |
Define Asset |
----------------------------------------------------------------------------------------------------------- |
|
2 |
Define Liability |
----------------------------------------------------------------------------------------------------------- |
(4)
Total (30)
All the best 😊
Process
Please take note of the following steps before completing the task:
Step 1 - Read instructions carefully
Step 2 - View video in the Introduction Tab
Step 3 - Follow links provided to answer the activities
Step 4- Follow links on the Resource Tab for more information
Step 5- View marking grid under Evaluation Tab
Step 6- Complete and submit task
NB! Please note the currency used in South Africa is a Rand indicated by the letter(R)
Additional Resource Below,
Evaluation
Learners, kindly take note of the below evaluation sheet when completing your task.
|
Activity |
What is expected to be done |
Mark allocation |
|
Activity 1 |
Learner can clearly identify the different concepts |
(___/20) |
|
Activity 2 |
Learner knows the basics of an accounting equation and able to implement it. |
(___/06) |
|
Activity 3 |
Learner can define the basic concepts |
(___/04) |
|
Total |
|
(___/30) |
Good luck :)
Conclusion
A C C O U N T I N G E Q U A T I ON
Liabilities and equity are equal to the total amount of assets in the fundamental accounting calculation. The accounting formula is as follows:
Assets = Liabilities + Equity
Because debt or capital is used to make purchases, both sides of the equation must be equal.
To complete the accounting equation one must be able to tell which concept is an income, expense, fixed asset, current asset, non-current liability, or current liability. Secondly. This knowledge alone will take you far in the accounting industry.
NB! Always remember for the present and the future that FOR EVERY DEBIT THERE'S A CREDIT (Your accounting equation must always balance)
Credits
RESOURCES
For more indebt explanation of basic accounting equation kindly listen the video below and make notes,
To excel in any accounting activity, it is important to know the basic accounting concepts namely income, expense, fixed asset, financial asset, current asset, non-current liability, or current liability.
Kindly follow the link below
https://bench.co/blog/accounting/assets-liabilities-equity/
Additional resources
https://courses.lumenlearning.com/vccs-acc211-17sp/chapter/the-basic-accounting-equation/
https://corporatefinanceinstitute.com/resources/knowledge/accounting/accounting-equation/