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Unformatted text preview: Frame 6- THE FINANCIAL ACCOUNTING PROCESS The accounting equation: Total assets = liabilities plus stockholders equity Balance because the sum of the interests in assets must always be equal to the assets themselves Right side of equation Shows the sources of the existing stock of assets Thus, liabilities are not only claims to assets but they are the sources of assets All assets provided by creditors (liability holders) or owners (stockholder) Equity Are interest in or claims upon assets Ex: buy new car for $4000, You withdraw $400 from savings account and borrowing the balance of $3600 from credit union Your equity in the automobile = $400 Aka owners equity or residual equity or interest in the asset Your credit union amount = $3600 Also the $3600 is a liability Residential equity or interest in an asset Equation Assets = liabilities + stockholders equity...
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