Must Know Before Examination! Summary Of Easy To Remember Basic Accounting Equations

Accounting basic equations (freepic)

YOGYAKARTA - The basic accounting equation is the main concept that students must understand before studying financial reports. By understanding this simple formula, you can find out how assets, obligations, and capital relate to each other in the accounting system.

This article will help students to recall the core of the basic accounting equation in an easy and practical way. Suitable for testing preparation or just strengthening an understanding of the basics of accounting.

Reporting from the E-Module of the Economy of the Directorate of High School Development - Ministry of Education and Culture, the basic equation of accounting is an important concept that explains that the total assets (harta) of a company are always balanced with the amount of obligations (debt) and capital (equity).

In simple terms, the basic formula of accounting equations can be written as (Asset = Obligation + Capital)

This equation shows that every financial transaction will affect a minimum of two accounts in financial reports, so that the balance between assets, obligations, and capital is maintained. By understanding this equation, we can find out about changes in the company's financial position from time to time.

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In modern accounting practices, the elements in this equation refer to the IFRS (International Financial Reporting Standards) standards which are also applied in Indonesia. Here are the important points:

By understanding the relationship between these three elements, students can more easily read and analyze financial reports accurately.

At the beginning of the month, Mrs. Wumti started a sewing business with the following transactions:

Analysis and Recording in Accounting Basic Equations:

Mrs. Linda deposited cash of Rp. 10,000,000.00 as initial capital.

The company's assets (cas) increased by Rp10,000,000.00, and the capital also increased by the same amount.

Mrs. Linda bought a sewing machine for Rp. 3,000,000.00 in cash payments.

Assets increased in equipment by Rp. 3,000,000.00, but cash was reduced by the same amount.

Mrs. Linda bought a cloth worth IDR 2,000,000.00 on credit.

Assets increased by Rp. 2,000,000.00 due to fabric supplies, and obligations increased by Rp. 2,000,000.00 because they had not been paid.

Mrs. Linda received a sewing service income of Rp. 1,500,000.00 in cash.

Cash increased by Rp1,500,000.00, and capital increased by the same amount.

Mrs. Linda paid an electricity and water fee of Rp. 500,000.00 in cash.

Cash decreased by IDR 500,000.00, and capital also decreased due to operating expenses.

Assets (Kas + Equipment + Supply) = IDR 10,000,000 - IDR 3,000,000 + IDR 3,000,000 + IDR 1,500,000 - IDR 500,000 = IDR 11,000,000

Obligation (Utang) = IDR 2,000,000

Capital = IDR 9,000,000

Assets (Rp11,000,000) = Obligation (Rp2,000,000) + Capital (Rp9,000,000)

This equation remains balanced and illustrates that every financial transaction always affects at least two accounts, but the total remains consistent in accordance with the basic principles of accounting.

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