Financial statement notes
(practical)
The accounting equation
Assets= Liabilities + Equity
Assets= Liabilities + [ (Capital - Drawings) + (Income - Expenses)]
This bracketed portion represents the owner’s equity/shareholder equity
Other equations needed when preparing financial statements
Straight line depreciation= (Original price - Scrap value) ÷ Useful life
OR
Straight line depreciation= (Original price - Scrap value) X rate of depreciation
Net book value= Original price - Accumulated depreciation
Reducing balance depreciation= Net book value X rate of depreciation
Owner’s equity= Capital - Drawings + Profit/Loss for the year
Shareholder’s equity= Share capital + retained earnings
(practical)
The accounting equation
Assets= Liabilities + Equity
Assets= Liabilities + [ (Capital - Drawings) + (Income - Expenses)]
This bracketed portion represents the owner’s equity/shareholder equity
Other equations needed when preparing financial statements
Straight line depreciation= (Original price - Scrap value) ÷ Useful life
OR
Straight line depreciation= (Original price - Scrap value) X rate of depreciation
Net book value= Original price - Accumulated depreciation
Reducing balance depreciation= Net book value X rate of depreciation
Owner’s equity= Capital - Drawings + Profit/Loss for the year
Shareholder’s equity= Share capital + retained earnings
