Chapter 1, Problem 11QS

To determine

Accounting equation: The assets, liabilities and equity relation known as the accounting equation. Assets are the resources of company and that increase as business expand whereas liabilities are the burden on company that has to pay in future, Equity means the owner claim on assets. An accounting equation represent the assets of the company are equal to the liabilities and equity of the company.

In can be represented as follow:

  $\text{Assets}=\text{Liabilities}+\text{Equity}$

Assets: Assets are the resources that a company need to run the business. An assets is economic resources of the company.

Liabilities: Liabilities are generally the amount owned by the company from lenders, suppliers, or bank. Liabilities are the burden on the company that they has to pay to others.

Equity: The company need finance to run the business. Equity is one of the method through which the company raise the capital.

To Identify: The effect of transactions on the accounting equation.