Basic of accounting

The basic accounting equation is assets = liabilities + equity. This is the Statement of Financial Position (It is the new name of Balance Sheet according to IFRS). The foundation for the balance sheet begins with the income statement, which is revenues - expenses = net income or net loss. This is followed by the retained earnings statement, which is beginning retained earnings + net income + additional capital(capital contribution) - dividends/drawings = ending retained earnings.

Equations:

• assets = liabilities + equity
•  revenues - expenses = net income or net los
• beginning retained earnings + net income + additional capital(capital contribution) - dividends/drawings = ending retained earnings.