Why Assets, Liabilities, Owners Equity, Static Status, Financials

"Assets = liabilities + owners' equity" This is a static formula of the balance sheet, if it is considered dynamically, it is the embodiment of the income statement. The company will have income and expenses for a certain period of time, and the surplus is profit, so it can be known that "income - expenses = profit".

When a certain period ends, the figures in the income statement are attributed to the balance sheet, that is, to the owners' equity. Therefore, the derivation is "assets = liabilities + owners' equity + profit for the year".

And because "assets = liabilities + owners' equity + income - expenses", you can get "assets + expenses = liabilities + owners' equity + income".

Assets = liabilities + owners' equity, which is an accounting identity that illustrates the relationship between the three from the perspective of accounting elements.

Assets are capital occupation, liabilities and owners' equity are funds**, from this point of view, assets must be equal to liabilities plus owners' equity. All occupancy must be supported by **.

For example, for the purchase of materials, the payment is not paid. The occupation of funds is the material, and the capital ** is the liability.

In this way, while assets increase, liabilities also increase, so that the equation of assets and liabilities plus equity on both sides of the equation is not broken. If the assets increase at the same time, the liabilities do not increase, then the money for the purchase of materials comes from.

Of course, if monetary funds are used to purchase materials, it is not a simultaneous increase in assets and liabilities, but an increase and a decrease within assets (an increase in assets and a decrease in monetary funds). If so, it doesn't break the accounting equation above either.

For another example, investing with monetary funds, the entries are.

Borrow: Bank deposit.

Credit: paid-up capital.

Bank deposits are asset-based, paid-in capital is equity-based, and both sides of the equation increase simultaneously, and the accounting equation holds.

Balance sheet and income statement, etc. (identity):

Assets, Liabilities, Owners' Equity;

Owners' Equity Paid-in Capital (Share Capital) Capital Reserve Surplus Reserve Undistributed Profit Difference in Translation of Foreign Currency Statements;

Undistributed Profit Undistributed Profit at the Beginning of the Period Profit for the Year Profit Distribution Undistributed Profit at the End of the Period in the Profit Distribution Statement;

Profit for the year Income statement income cost expense income tax (excluding other business income and expenditure, non-operating income and expenditure, etc.);

It is precisely because of the use of double-entry bookkeeping (loan and debit bookkeeping, there must be loans, and loans must be equal) and the six elements of accounting (assets, liabilities, owners' equity, income, expenses and profits, the first three focus on reflecting the financial status of the enterprise, and the latter three focus on reflecting the operating results of the enterprise), so that the balance sheet is balanced and the relationship between collusion is maintained.

That's right. Owner's equity refers to the residual equity enjoyed by the owner after deducting liabilities from the assets of the enterprise, and the owner's equity assets - liabilities.

Owner's equity reflects the owner's residual equity in the enterprise, so the recognition of owner's equity mainly relies on other accounting elements, especially the recognition of assets and liabilities; The determination of the amount of owner's equity is also mainly based on the measurement of assets and liabilities.

Accounting Standards for Business Enterprises Basic Standards" on the provisions of the relevant provisions of the owner's equity: Article 26 The owner's equity refers to the residual equity enjoyed by the owner after deducting the liabilities from the assets of the enterprise. Article 28 The amount of owners' equity depends on the measurement of assets and liabilities.

1. The balance sheet, also known as the statement of financial position, represents the main accounting statements of the financial position of the enterprise on a certain date (usually at the end of each accounting period) (that is, the status of assets, liabilities and owners' equity), and the balance sheet uses the principle of accounting balance to divide the assets, liabilities and shareholders' equity "transaction accounts that comply with accounting principles into two blocks" of "assets" and "liabilities and shareholders' equity". Condensed into a single report. In addition to the internal error removal, business direction, and prevention of malpractice, its report function can also allow all readers to understand the business status of the enterprise in the shortest time.

Second, in the last part of the balance sheet, most people who have not learned financial knowledge cannot understand "owners' equity". It mainly consists of four parts: paid-in capital (share capital for listed companies), capital reserve, surplus reserve, and undistributed profits.

For investment**, owner's equity is not a particularly important indicator, and the core indicator can also be found in the income statement. However, we can easily understand the company's accumulated operating conditions and expectations for itself from the owner's equity data of the company, so as to bring some enlightenment to investors, especially long-term investors.

3. Owner's equity is the difference between total assets and total liabilities. To give an easy-to-understand example: Xiaoshuai opened a commissary, from rent to decoration to purchase, a complete set of procedures, spent 100,000 yuan.

Of the 100,000 yuan, 60,000 yuan was borrowed from the bank, and 40,000 yuan was paid by himself, and the 40,000 yuan was the "owner's equity".