Accounting identity, what is an accounting identity

1. Assets increase and decrease.

Withdraw cash from the bank.

Borrow: Cash. Credit: Bank deposits.

2. Liabilities increase and decrease.

After negotiation between the two parties, the short-term loan was extended to a long-term loan.

Borrow: Short-term borrowing.

Credit: Long-term borrowing.

3. The owner's equity increases and decreases.

Upon resolution of a general meeting of shareholders or a similar body, the capital reserve shall be converted into capital.

Borrow: Capital reserve.

Credit: paid-up capital.

4. Assets and liabilities increased at the same time.

Purchase of goods, arrears are not paid.

Borrow: Inventory of goods.

Credit: Accounts payable.

5. Assets and liabilities are reduced at the same time.

Bank deposit to repay the payment.

Debit: Accounts payable.

Credit: Bank deposits.

6. The equity of asset owners increases at the same time.

The investment money is deposited in the bank.

Borrow: Bank deposit.

Credit: paid-up capital.

7. The equity of asset owners decreases at the same time.

The creditor recovers the investment.

Borrow: paid-up capital.

Credit: Bank deposits.

8. Liabilities increased and owners' equity decreased.

The creditor's investment is returned, and the payment has not been paid.

Borrow: paid-up capital.

Credit: Accounts payable.

9. Liabilities decreased and owners' equity increased.

With the consent of creditors, short-term borrowings to enterprises are converted into investments.

Borrow: Short-term borrowing.

Credit: paid-up capital.

Hello. Assets = Liabilities + Owners' Equity.

1. Assets increase and decrease.

2. Liabilities increase and decrease.

3. The owner's equity increases and decreases.

4. Assets and liabilities increased at the same time.

5. Assets and liabilities are reduced at the same time.

6. The equity of asset owners increases at the same time.

7. The equity of asset owners decreases at the same time.

8. Liabilities increased and owners' equity decreased.

9. Liabilities decreased and owners' equity increased.

The financial identity equation, also known as the basic accounting equation and the static accounting equation, is an accounting equation used to reflect the balance between assets, liabilities and owners' equity at a specific point in time. That is: assets = liabilities + owners' equity.

This equation is the theoretical basis of double-entry bookkeeping and the basis for the preparation of the balance sheet.

The role is mainly manifested in:

Clarifying the property rights relationship of enterprises is conducive to protecting the legitimate rights and interests of creditors and investors.

It comprehensively reflects the asset-liability situation of the enterprise, which is convenient for the management of asset-liability ratio.

In accounting practice, it is the basis for classification, double-entry bookkeeping, and the construction of accounting statements when setting up accounts and accounts.

An accounting identity is a relationship in which the individual accounting elements must be equal in total. It reveals the relationship between the elements of various accounting objects, and is the theoretical basis for double-entry bookkeeping and the preparation of accounting statements. The accounting identity is expressed differently for different accounting periods.

Accounting identities come in the following forms:

1. Assets = equity, assets = creditor's equity + owner's equity.

2. Income-expenses = profits.

3. Assets = liabilities + owners' equity + (income - expenses).

The principle of equations. The first accounting equation reflects the static situation of the company's capital movement, that is, a certain day in the operation of the enterprise, generally the start date or settlement date; The second equation reflects the situation of the company's capital movement, all assets are to make money, and once the assets are used and income, the assets are converted into expenses, and the income minus the expenses is the profit, also known as the net income.

The net income will be used as an asset for the next round of operations, so Equation 3 is generated. Equation 3 does not destroy Equation 1, when the profits are distributed, and after the shareholders' earnings are divided and a part of the taxes are paid, Equation 3 disappears and becomes Equation 1 again.

Therefore, no matter how the six elements of accounting are transformed, they will eventually return"Assets = Liabilities + Owners' Equity. "The equation. In practice, if the equation is uneven, it means that there is a mistake in accounting. Accounting has the rules of the accounting game. There are the following prerequisites to consider in accounting.

An accounting identity is a relationship in which the individual accounting elements must be equal in total.

This equation is the basis for accounting, bookkeeping, accounting, and balance sheet compilation, which indicates the share of both shareholders and creditors in the assets of the enterprise. When the liabilities remain unchanged, the assets and the owner's equity change in the same direction. If the owner's equity remains the same, the assets and liabilities will change in the same direction, and when the owner's equity and liabilities both change, the change in their assets is equal to the sum of the two.

Accounting equation (2) income expenses profit (or loss) i.e., what is gained, what is paid, what is earned (or lost).

The goal of a business is to make money, and a business is only profitable if the income earned is offset by the expenses spent on that income.

Accounting equation (three comprehensives): Assets, Liabilities, Owners' Equity, Income, and Expenses.

In the operation of an enterprise, the profit in the "income, expense, and profit" indicates that the cash inflow is greater than the cash outflow, that is, the enterprise assets have increased.

New Owners' Equity Old Owners' Equity Profits Old Owners' Equity Revenues Expenses; Whereas, the new assets, liabilities, new owners' equity, liabilities, and the old owners' equity revenues and expenses.

It is not difficult to see that the first accounting equation reflects the static situation of the company's capital movement, that is, a certain day in the operation of the enterprise, generally the start date or settlement date; The second equation reflects the situation of the company's capital movement, all assets are to make money, and once the assets are used and income, the assets are converted into expenses, and the income minus the expenses is the profit, also known as the net income. The net income will be used as an asset for the next round of operations, so Equation 3 is generated. Equation 3 does not destroy Equation 1, when the profits are distributed, and after the shareholders' earnings are divided and a part of the taxes are paid, Equation 3 disappears and becomes Equation 1 again.

Therefore, no matter how the six elements of accounting change, they will eventually return to the equation of "assets, liabilities, and owners' equity". In practice, if the equation is uneven, it means that there is a mistake in accounting.

Accounting equation

It is a mathematical expression that reveals the intrinsic relationship between the elements of accounting, also known as an accounting equation or accounting identity. The accounting equations are: "Assets = Liabilities + Owners' Equity", "Revenue-Expenses = Profits", "Assets + Expenses = Liabilities + Owners' Equity + Income".

Assets = Liabilities + Owners' Equity, this is the most basic accounting equation, often referred to as the first accounting equation.

Income-expense = profit, this equation can be called the second accounting equation, which is the dynamic performance of capital movement, the basis for the preparation of profit and loss statement, and the dynamic number of a certain period.

Assets = Liabilities + Owners' Equity + Profits, which is the third accounting equation that combines the first accounting equation and the second accounting equation, is the accounting equation before the distribution of profits.

Assets = Liabilities + Owners' Equity.

Profit = Income - Expenses.

Assets = Equity.

Assets = Liabilities + (Owners' Equity + Profits).

Assets = Liabilities + (Owner's Equity + Income - Expenses).

Assets = Liabilities + (Owner's Equity + Income - Expenses).

Assets = Liabilities + Owners' Equity.

Assets are divided into current assets and non-current assets.

Liabilities and owners' equity are divided into current liabilities and long-term liabilities, profit distribution and capital reserve, surplus reserve, paid-in capital (share capital), etc. Of course, there are too many contents of it, and all walks of life are different, but the most basic ones are almost the same, and it is recommended to look at the accounting standards to understand it better.

Assets are equal to liabilities plus owners' equity.

Assets = Liabilities + Owners' Equity.

Assets = Liabilities + Owner's Equity, described in the simplest way, assets are all the money in your pocket, liabilities are the money you borrow, and the owner's equity is your own money, i.e. all the money in your pocket = money you borrowed + your own money.

It reveals the connection between the elements of various accounting objects, and is the theoretical basis for double-entry bookkeeping and preparation of accounting statements. The accounting identity is expressed differently for different accounting periods. The first accounting equation reflects the static situation of the company's capital movement, that is, a certain day in the operation of the enterprise, generally the start date or settlement date;

The second equation reflects the situation of the company's capital movement, all assets are to make money, and once the assets are used and income, the assets are converted into expenses, and the income minus the expenses is the profit, also known as the net income.

The net income will be used as an asset for the next round of operations, so Equation 3 is generated. Equation 3 does not destroy Equation 1, when the profits are distributed, and after the shareholders' earnings are divided and a part of the taxes are paid, Equation 3 disappears and becomes Equation 1 again.

Asset relationships. Owners' equity should include creditors' rights (liabilities) and investors' rights (shareholders' equity), and the rights and interests must be the owners' rights, not the rights and interests of other persons that have nothing to do with the ownership; For this purpose, the owner's equity can be shortened to equity.

In order to simplify the accounting identity and make it highly generalized and clearly balanced, it is recommended to update the accounting identity "assets-liabilities = owners' equity", which is currently used in the Standards and is also internationally used for many years, to "assets = equity".

Assets and rights are two sides of the same thing, the unity of opposites. There are certain assets, and at the same time, there are certain rights and interests; On the contrary, there is a certain amount of equity, and at the same time, there is a certain amount of assets. The relationship between assets and equity is: interrelated, mutually restrictive, interdependent and mutually balanced.

The accounting equation is the equation that reflects the quantitative relationship of each accounting element in the accounting, and the accounting equation is the theoretical basis for double-entry bookkeeping, trial balance and preparation of accounting statements. Accounting equations, also known as accounting identities, include static accounting equations and dynamic accounting equations.

1.The accounting equation is the equation that reflects the quantitative relationship of each accounting element in the accounting, and the accounting equation is the theoretical basis for double-entry bookkeeping, trial balance and preparation of accounting statements. Accounting equations, also known as accounting identities, include static accounting equations and dynamic accounting equations.

2.Static accounting equation: assets - liabilities = owners' equity.

This equation reflects the quantitative relationship between the elements of the balance sheet, and it indicates the basic status of the various assets owned by the enterprise at a given point in time and the claims of creditors and investors to the assets of the enterprise. The above accounting equation illustrates the intrinsic relationship between the three major accounting elements of assets, liabilities and owners' equity, and is the theoretical basis for setting up accounts, double-entry bookkeeping, trial balance and preparing balance sheets.

3.The dynamic accounting equation is an accounting equation that reflects the operating results of an enterprise in a certain accounting period, and is composed of the combination of dynamic accounting elements (revenue, expenses, and profits). The formula is "Revenue, Expenses = Profits".

4.The accounting identity reforms the original accounting formula, that is, "total capital occupied = total capital **", and replaces it with an accounting identity that can reflect the rights and obligations of the enterprise as a legal person: "assets = liabilities + owners' equity".

It reveals the relationship between the elements of various accounting objects, and is the theoretical basis for double-entry bookkeeping, trial balance and preparation of accounting statements. The accounting identity is expressed differently for different accounting periods.

5.The third premise of accounting is accounting periodization. In order to compile reports and provide information to users on a regular basis, companies divide their continuous operations into multiple segments.

It is generally divided into years, quarters, and months. For example, if you want to invest in an evergreen company, you can't wait for it to run to the end to see whether it is a loss or a profit before making a decision, but to see whether it was a profit or a loss in the last period, whether it has any prospects, and then make a decision. Therefore, for units and individuals who have an interest in the enterprise, it is very important to prepare financial statements in periods and on a regular basis.

Of course, accounting periodization is just an artificial division and is different from business cycles. Some business cycles are less than one accounting period, while others last for several time periods.

Assets = Liabilities + Owners' Equity.

Profit = Income - Expenses.

Assets = Equity.

Assets = Liabilities + (Owners' Equity + Profits).

Assets = Liabilities + (Owner's Equity + Income - Expenses).

Assets = Liabilities + (Owner's Equity + Income - Expenses).

The most basic one is the most basic one, assets = liabilities + owners' equity. Everything else revolves around this.

Assets = Liabilities + Equity Ownership.

Assets = Liabilities + Owners' Equity.