Discussion: • In your own words, explain the recording process and the accounting equation to someone who has no accounting experience.
• Then, give your opinion on the elements or areas that might cause the most confusion or be the most difficult to grasp.
Please read and respond to the post of at least one (1) other student.
The recording process helps ensure business transactions are properly recorded; ensuring the accuracy of assets of a business that are the sum of the liabilities and owner equity. The recording process assigns specific accounts maintained by a company, showing debits and credits of the accounts. Additionally, proper recording of transactions allows for analysis of assets, liabilities, and owner equity ensuring accurate and responsible reporting of business transactions. Ethical recording of transactions makes giving accurate information to comply with local, state, and federal business accounting practices. The accounting equation of (Assets = Liabilities + Owner Equity); assets are physical things that a company owns such as cash, supplies, equipment, and land which are equal to the liabilities of the business such as accounts payable, salary/wage payable, and tax/interest payable accounts plus owner equity such as investments, revenues from sales and or services, owner drawing, and owner expenses.
I would say that owner equity could be somewhat confusing. A company has liabilities, but an owner can have expenses that sound similar to accounts payable. Payable and receivable accounts are liabilities of the business, but revenues and expenses that directly affect the owner/owners contribute to equity. Accounting is not as easy as it seems.