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which of the following is the Accounting equation?

Forums › ACCA Forums › ACCA FA Financial Accounting Forums › which of the following is the Accounting equation?

  • This topic has 2 replies, 2 voices, and was last updated 11 years ago by Tom.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • February 7, 2014 at 8:57 pm #156084
    Tom
    Member
    • Topics: 15
    • Replies: 15
    • ☆

    Assets-Liabilities+share capital=Retained Earnings.
    Assets-Liabilities-Capital=Retained earnings.
    Assets=Liabilities-Capital+Retained Earnings.

    The answer is:
    Assets-Liabilities-Capital=Retained earnings.

    But can someone explain to me what is the difference between these two?
    Assets-Liabilities+share capital=Retained Earnings.
    Assets-Liabilities-Capital=Retained earnings.

    In basic maths dont you add before subtracting?
    Or is it the difference between Capital and Share Capital?

    February 8, 2014 at 7:59 am #156594
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Capital and share capital are the same thing, but (assets – liabilities + capital) certainly does not equal (assets – liabilities – capital).

    It doesn’t matter whether you add first or subtract first. Make up some numbers and try it!!

    Suppose assets = 500; liabilities = 200; capital = 100

    Assets – liabilities + capital = 500 – 200 + 100 = 400
    Assets – liabilities – capital = 500 – 200 – 100 = 200

    They are not the same 🙂

    February 8, 2014 at 10:13 am #156732
    Tom
    Member
    • Topics: 15
    • Replies: 15
    • ☆

    Ahhh adding a plus to a minus doesnt increase the minus. Silly. Thanks John (On both answers!).

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