Accounting is important for building a business, so students need to understand it well. Professors often give assignments on different accounting equations to help students learn. However, students may find these assignments challenging because they require focus and accuracy.

As a result, they may seek accounting assignment help. If you’re unsure about your skills, Global Assignment Help can help you with solving accounting equations. But before that, it’s important to understand the basics of this subject.

What is Accounting?

Accounting involves keeping track of a company’s financial transactions and organizing the information. The goal is to create reports and analyses that show how the business is doing financially.

The main purpose of accounting is to provide information about a company’s financial health and performance.

Key Elements of Accounting

To be good at accounting, you need to understand its key elements. There are three main things to know:

Assets:

These are things that a company owns, like cash, inventory, and investments.

Liabilities:

These are things that a company owes to others, like loans and wages.

Capital:

This is the difference between assets and liabilities. The basic equation is Assets = Liabilities + Capital.

Steps to Solve Different Accounting Equations with Examples

There are mainly five types of accounting problems:

• Solving the equation for a corporation’s finances.
• Solving the equation for a sole proprietorship’s finances.
• Calculating a missing amount in owner’s equity.
• Using a more detailed equation for a sole proprietorship’s finances.
• Using a more detailed equation for a corporation’s finances.

1. Solving Problems for Corporations

To solve a corporation’s accounting problem, use this equation:

Assets = Liabilities + Stockholder’s Equity

Example:

Suppose members of an organization invest a total of $20,000 to start a company and issue 2,000 shares of common stock. The corporation’s accounting is:

• Assets ($20,000) = Liabilities (0) + Stockholder’s Equity ($20,000)

2. Accounting Equation for a Sole Proprietorship

For a sole proprietorship, which is a business run by a single individual, use this equation:

Assets = Liabilities (no effect) + Owner’s Equity

Example:

Let’s say Mr. Bill is the sole proprietor of a business and invests $20,000 to start it. After this transaction, the accounting equation is:

• Assets ($20,000) = Liabilities (no effect) + Owner’s Equity ($20,000)

3. Calculating a Missing Amount Within Owner’s Equity

Let’s say we don’t know the net income of a company for 2018, but we do know the loan amounts and the initial and final balances. We can still find the net income easily using this example.

Step 1: Start with the owner’s equity on January 1, 2018, which is $200,000 minus $80,000, giving us $120,000.

Step 2: Then, calculate the owner’s equity on December 31, 2018, which is $256,000 minus $68,000, giving us $192,000.

Next, add the owner’s equity on January 1, 2018, and the investments, which totals $140,000. Then subtract this from the subtotal, $268,000 minus $140,000, which equals $128,000. So, the net income is $128,000.

4. Expanded Accounting Equation for a Sole Proprietorship

For a business owned by one person, here’s the equation you use to solve the expanded accounting problem:

What the business owns = What it owes + What the owner put in + What it made – What it spent – What the owner took out

For example, if the business made $1800 and spent $1440, you can find how much it earned like this:

What it made – What it spent = What it earned

1800 – 1440 = 360

5. Expanded Accounting Equation For a Corporation

Here’s the formula for solving the expanded accounting equation for a corporation:

Assets = Liabilities + Paid-in Capital + Revenues – Expenses – Dividends – Treasury Stock

Example:

We’ll use the same problem we solved for the expanded accounting equation of a sole proprietorship, but this time for a corporation.

You can also calculate the net income easily by subtracting expenses from revenue:

Revenue minus Expenses equals Net Income

1800 – 1440 = 360

Wrapping Up

The accounting equation says that a company’s assets are equal to its total liabilities and shareholders’ equity. This basic principle helps keep a company’s financial records balanced.

Those are the five basic types of accounting equations. I hope you found these solutions easy to understand and accurate. Now you should have a clear idea of what accounting is, why it’s important, and the key elements needed for calculations.