Computation Of Accounting Equation

The accounting equation shows that any point of time the total assets of a business are always equal to the total of its capital and liabilities. If, by a financial transaction, there is a change in the amount of assets there must be a corresponding change in the amount of either capital or liabilities or both. Therefore, double-entry book-keeping can also be seen as mainly a set of rules by which an increase in assets is connected with a corresponding decrease or with the balancing increase and/or decrease in equity. The set of can be stated in the following manner.

* An increase in the amount of assets with a corresponding decrease in the amount of assets.
* An increase in the amount of assets with a corresponding increase in the amount of capital or liabilities or both.
* A decrease in the amount of assets with a corresponding increase in the amount of assets.
* A decrease in the amount of assets with a corresponding decrease in the amount of capital or liabilities or both.
* An increase in the amount of capital with a corresponding increase in the amount of assets.
* An increase in the amount of capital with a corresponding decrease in the amount of liabilities.
* A decrease in the amount of capital with a corresponding decrease in the amount of assets.
* An increase in the amount of liabilities with a corresponding increase in the amount of assets.
* An increase in the amount of liabilities with a corresponding decrease in the amount of liabilities.
* A decrease in the amount of liabilities with a corresponding decrease in the amount of assets.