Accounting equation crash course

Accounting Equation notes basic financial accounting formula grade 8-12 ems



- A rental company rents out a delivery truck for a 10 months contract for R2500 per month , cost price of
the vehicle is R75 000,


- The company made loan of R50 000 rands from xyz bank as contribution towards their first delivery
truck purchase.

Required :
Compile an accounting equation using the above-mentioned transactions and balance sheet statement

Formula for accounting equation
Assets =owner’s equity +liabilities

Solution

Assest=R75 000(delivery Truck)

Equals to

Owner’s equity=
Rental income. R25000
(2500x10months)


Plus

liability= R50 000 (truck loan)




Financial statements(balance sheet) breakdown of accounting equation :-

Assets
Non current /fixed assets
Delivery vehicle. R75 000

Current assets
0

Total assets R75000

Equity and liabilities
Non current liabilities
Delivery vehicle loan. R50 000

Current liabilities
Amount payable. R0

Equity