A fellow accounting student has difficulty understanding how the fundamental accounting equation stays in balance when a compound entry with one debit and two credits is recorded. Consider, for example, that a business bought equipment for $15,000, paid $5,000 in cash, and placed the remainder on account. This means that there are two credits and one debit—one debit and one credit on the left side of the equation and the other credit on the right side of the equation. Explain to your fellow student how the equation stays in balance.
A fellow accounting student has difficulty understanding how the fundamental accounting equation stays in balance when a compound entry with one debit and two credits is recorded. Consider, for example, that a business bought equipment for $15,000, paid $5,000 in cash, and placed the remainder on account. This means that there are two credits and one debit—one debit and one credit on the left side of the equation and the other credit on the right side of the equation. Explain to your fellow student how the equation stays in balance.
Solution Summary: The author explains the accounting equation as an accounting tool expressed in the form of equation.
A fellow accounting student has difficulty understanding how the fundamental accounting equation stays in balance when a compound entry with one debit and two credits is recorded. Consider, for example, that a business bought equipment for $15,000, paid $5,000 in cash, and placed the remainder on account.
This means that there are two credits and one debit—one debit and one credit on the left side of the equation and the other credit on the right side of the equation. Explain to your fellow student how the equation stays in balance.
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
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