# Accounting Equation (Crossword Puzzles)

Author:
Harold Averkamp, CPA, MBA

#### Accounting Equation

Open Online Open PDF

The accounting equation is Assets = Liabilities + Owner’s (Stockholders’) Equity. The accounting equation should remain in balance at all times because of the double-entry system of accounting or bookkeeping. (This system means every transaction will affect at least two accounts in the general ledger.)

Here are some examples of how the accounting equation remains in balance:

• An owner’s investment into the company will increase the company’s assets and will also increase owner’s equity

• When the company borrows money from its bank, the company’s assets increase and the company’s liabilities increase

• When the company repays the loan, the company’s assets decrease and the company’s liabilities decrease

• If the company pays cash for a new delivery van, one asset (cash) will decrease and another asset (vehicles) will increase

• If a company provides a service to a client and immediately receives cash, the company’s assets increase and the company’s owner’s equity will increase because it has earned revenue

• If the company provides a service and allows the client to pay in 30 days, the company has increased its assets (Accounts Receivable) and has also increased its owner’s equity because it has earned service revenue

• If the company runs a radio advertisement and agrees to pay later, the company incurs an expense that reduces owner’s equity and increases its liabilities

From our examples, you can see that owner’s equity increased when the owner made an investment in the business and also when revenues were earned. Owner’s equity decreased when the owner withdrew assets from the business and when expenses were incurred. This leads us to the expanded accounting equation:

Assets = Liabilities + Owner’s Capital + Revenues – Expenses – Draws

• Perform better at your job
• Get hired for a new position

#### Earn Our Certificates of Achievement

• Debits and Credits
• Financial Statements
• Balance Sheet
• Income Statement
• Cash Flow Statement
• Working Capital and Liquidity
• Financial Ratios
• Bank Reconciliation
• Accounts Receivable and Bad Debts Expense
• Payroll Accounting

#### PRO Plus

Features
Explanations
Quizzes
Q&A
Word Scrambles
Crosswords
Bookkeeping Video Training
Financial Statements Video Training
Flashcards
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Bookkeeping Study Guide
Managerial Study Guide
All PDF Files
Progress Tracking
Certificate - Debits and Credits
Certificate - Financial Statements
Certificate - Balance Sheet
Certificate - Income Statement
Certificate - Cash Flow Statement
Certificate - Working Capital
Certificate - Financial Ratios
Certificate - Bank Reconciliation
Certificate - Accounts Receivable and Bad Debts Expense
Certificate - Payroll Accounting