This is how the accounting works. Everything pertains to what an Organization owns, have and what it has to give. There is always a balance to what it owns and what it has to give. This “balance” is converted into an equation, also called the Accounting Equation , which is: ASSETS = LIABILITIES + OWNER’S EQUITY though I’ve understood it this way: OWNER’S EQUITY = ASSETS – LIABILITIES Let’s take a simple example to justify the above equation, say you have Rs.1,000 but you know that you have to pay a loan of Rs.400 that you borrowed from your friend. So according to the equation Rs.1000 is your Asset, Rs.400 loan is your Liability and Rs.600 is the Equity that you own. Every organization which is registered with Government is obliged to disclose the above mentioned balance in a document called Balance Sheet. That’s all for the accounting equation. Moving on after the accounting equation, There is a Debit (Always on the...
These are some notes from my learnings in EBS for past 13 years.