The Accounting Equation: Assets = Liabilities + Owner's Equity or ( A = L + O )
Therefore, if total liabilities equals $25,000 and
Assets total $225,000, then Owners Equity is
$200,000.
Now lets assume that the owner withdraws
$100,000 cash (this is an asset) out of the
business. This accounting transaction decreases
the Owners equity and the asset side of the
equation.
You will notice that every time your bookkeeper
(you) completes a transaction that both sides of
the equation are effected equally.
Read more about transactions and the accounting
equation.
Accounting Solutions is your one stop source for all your bookkeeping needs. We also can help you choose
the right book keeping software for your business. Ask us also about our business tax specialists.
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