What is the expanded accounting equation?
The expanded accounting equation replaces Owner’s Equity in the basic accounting equation (Assets = Liabilities + Owner’s Equity) with the following components: Owner’s Capital + Revenues - Expenses - Owner’s Draws. In other words, the expanded accounting equation for a sole proprietorship is: Assets = Liabilities + Owner’s Capital + Revenues - Expenses - Owner’s Draws.
In the expanded accounting equation for a corporation, Stockholders’ Equity in the basic accounting equation (Assets = Liabilities + Stockholders’ Equity) is replaced by these components: Paid-in Capital + Revenues - Expenses - Dividends - Treasury Stock. The resulting expanded accounting equation for a corporation is: Assets = Liabilities + Paid-in Capital + Revenues - Expenses - Dividends - Treasury Stock.
The expanded accounting equation allows you to see separately (1) the impact on equity from net income (increased by revenues, decreased by expenses), and (2) the effect of transactions with owners (draws, dividends, sale or purchase of ownership interest).
Learn about the Accounting Equation.
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Thanks Accounting Coach.
i just like this programe
it inspire me a lot the lesson is rely interesting. i love the studying. thanks you Accounting coach
the expanding accounting equation of a sole properitor is Asset=Liabilities+owner’s Capital +revenue _ expenses_ owner Drawing.
how would you put this in a standard accounting equation.
1. invested 19000 cash in business
2. bought equip for cash 3000
3. bought addtl equip on acct 2000
4. pt 300 csh to reduce # 3
Willing to join
I do not understand how revenue earnings fit into the expanded equation? Could you please explain how this fits into the equation?