Lesson Two: The Basic Accounting Equation
When analyzing a business transaction, it is important to be capable of understanding the transaction from a big picture perspective. That is, how would this transaction affect the company’s overall asset, liabilities, and equity balance. To do this, we use a useful academic tool: the basic accounting equation.
The basic account equation is:
Assets = Liabilities + Equity
Follow the lesson below to see what each of these account types represent and how we can categorize frequently-used accounts into these five main categories.
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It looks like you’ve mastered this lesson. Move on to Lesson Three:
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