which of the following is the Accounting equation?

This topic has 2 replies, 2 voices, and was last updated 12 years ago by Tom.

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February 7, 2014 at 8:57 pm #156084
Tom
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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
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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
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Ahhh adding a plus to a minus doesnt increase the minus. Silly. Thanks John (On both answers!).
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