ACCOUNTING EQUATION

ACCOUNTING EQUATIONASSETS = LIABILITIES + OWNER'S EQUITY

ASSETSIt is classified into 2 categories which are Non-Current Assets and Current Assets.NON-CURRENT ASSETSIt is the assets which is having the useful life for more than 12 months.Example: Buildings, Premises, Vehicle, Furniture, etcCURRENT ASSETSIt is the assets which is having the useful life for less than 12 months.Example: Closing Inventory, Accounts Receivable, Cash, Bank, etc

LIABILITIESIt is the debts that owed by company to the other parties.it is also classified into 2 categories which are Non-Current Liabilities and Current Liabilities.NON-CURRENT LIABILITIESIt is the debts which is owing by the business for more than 12 months.Example: Bank Loan, Mortgage Loan, etcCURRENT LIABILITIESIt is the debts which is owing by the business for less than 12 months.Example: Accounts Payable, Bank Overdraft, etc

OWNER'S EQUITYIt is the part that recording for how much the business owner had invested into the business.The items that recorded into the element such as Capital, Drawings, Net Profit / Net Loss, etc

EXERCISEThe total amount for assets is RM 12,000. The amount that invested by the owner was RM 10,000. Therefore, what is the value for Liabilities?ASSETS = LIABILITIES + OWNER'S EQUITYRM 12,000 = LIABILITIES + RM 10,000LIABILITIES = RM 12,000 - RM 10,000LIABILITIES = RM 2,000