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In: Accounting

Provide a short definition of each component of the accounting equation on a balance sheet.

Provide a short definition of each component of the accounting equation on a balance sheet.

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Expert Solution

Accounting equation is Asset = Liabilities + Equity

Asset - Assets are resources controlled by an entity as a result of past events and from which future economic benefits are expected to flow to the enitity. Simply speaking, Assets are anything that a company has ownership on it.

Liabilities - Liability is a present obligation of the entity arising from past events and the settlement of which is expected to result in an outflow from the entity of resources enbodying economic benefits. It is what a company owes.

Equity - Equity can be defined as the residual interest in the assets of the company after deducting all its liabilities. It is the amount of capital invested by the share holders of the company.

ekkarill92 answered 2 years ago
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