What do you mean by equities, Accounting Basics

Assignment Help:

Q. What do you mean by Equities?

Assets were described earlier as the things of value owned by the business or the economic resources of the business. Equities are every claims to or interests in assets. For instance suppose that you purchased a new company automobile for USD 15000 by investing USD 10000 in your own corporation and borrowing USD 5000 in the name of the corporation from a bank. Your equity in an automobile is USD 10000 and the bank's equity is USD 5000. You can further explain the USD 5000 as a liability because you owe the bank USD 5000. If you are a corporation you can illustrate your USD 10000 equity as stockholders' equity or interest in the asset. Ever since the owners in a corporation are stockholders the basic accounting equation becomes

Assets A = Liabilities L + Stockholders' Equity SE

We can enter in the amount of its liabilities, assets and stockholders' equity

A = L + SE

USD 38,700 = USD 6,600 + USD 32,100

Remember that somebody should provide assets or resources-either a creditor or a stockholder.

Consequently this equation must always be in balance.

You are able to also look at the right side of this equation in another manner. The stockholders' equity and liabilities show the sources of an existing group of assets. Therefore liabilities aren't only claims against assets but also sources of assets. Together owners and creditors provide all the assets in a corporation. The elevated the proportion of assets provided by owners the more solvent the company. But companies are able to sometimes improve their profitability by borrowing from creditors and using the funds effectively. Since a business engages in economic activity the dollar amounts and composition of its liabilities, assets and stockholders' equity change. But the equality of the basic accounting equation always holds.


Related Discussions:- What do you mean by equities

Determining entries for January, Received $170,000 cash from Electronic Art...

Received $170,000 cash from Electronic Arts, Inc. for service revenue earned in January.

Explain about purchase returns and allowances, Q. Explain about Purchase re...

Q. Explain about Purchase returns and allowances? Purchase returns and allowances A purchase return takes place when a buyer returns merchandise to a seller. When a buyer recei

State the term- purchases returns and allowances, State the term- Purchases...

State the term- Purchases Returns and Allowances Purchases Returns and Allowances is the name of the account which provides better control of allowances and returns of mercha

Explain financial accounting information, Q. Explain Financial accounting i...

Q. Explain Financial accounting information? A Financial accounting information is precedent in nature that reporting on what has happened in the past. To facilitate comparison

Choosing an accounting career, Q. Choosing an accounting career? How co...

Q. Choosing an accounting career? How companies have a choice in inventory cost methods among specific identification, LIFO, FIFO and weighted-average. Likewise one of the grea

What is the fair labor standard act, What is the Fair labor standard act ...

What is the Fair labor standard act Fair labor standard act (Wages and Hours Law) establishes standards for minimum wages, child labor, overtime pay, required payroll record

Purpose of adjusting entries, Q. Purpose of adjusting entries? In this ...

Q. Purpose of adjusting entries? In this section we exemplify each of the four types of adjusting entries asset/expense liability/revenue, asset/revenue and liability/expense.

Purchased a latest machine, Teague Company purchased a latest machine on Ja...

Teague Company purchased a latest machine on January 1, 2012, at a cost of $150,000. The machine is expected to have an 8-year life and a $15,000 salvage value. The machine is expe

What is the marginal cost and average total cost, Below is a table with tot...

Below is a table with total data for a firm in a perfectly competitive industry. Quantity Total Cost 0 100 10

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd