Q. Show Recording changes in assets?
Recording changes in assets, liabilities, and stockholders' equity
While recording commerce transactions remember that the foundation of the accounting process is the following basic accounting equation
Assets=Liabilities + Stockholders 'Equity
Recording transactions into the T-accounts is simple when you focus on the equal sign in the accounting equation. Assets which are at the left of the equal sign increase on the left side of the T-accounts. Stockholders' equity and Liabilities to the right of the equal sign increase on the right side of the T-accounts. You previously know that the left side of the T-account is the debit side and the right side to summarize:
- Assets enhance by debits (left side) to the T-account and decrease by credits (right side) to the T-account.
- Stockholders' equity and Liabilities decrease by debits (left side) to the T-account as well as increase by credits (right side) to the T-account.
Applying these two rules maintain the accounting equation in balance. At present we apply the debit and credit rules for liabilities, assets, and stockholders' equity to business transactions. Suppose corporation issues shares of its capital stock for USD 10000 in transaction 1. Reminder the figure in parentheses is the number of the transaction and ties the two sides of the transaction together. The company files the receipt of USD 10000 as follows
This transaction increases the cash and asset which is recorded on the left side of the Cash account. After that the transaction increases stockholders' equity which is recorded on the right side of the Capital Stock account.