ACC205 Week 1 Discussions and Responses.docx

# You explained the accounting equation in a fashion

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balance with the assets total. You explained the accounting equation in a fashion that a young child could understand it. I never really thought about my assets worth, but now I realize that I need to sit down and really look at things. Great Post! Mattfisher64 [Screen name]. (2010, May 17) Accounting Equation - Ch. 1 Video 1 [Video file]. Video File Discussion 1Response 2 Emily Wrote This happens when I deal with my car loan. My car cost 15,000(assets) and I borrowed 10,000 (liabilities) and I paid 5,000 (equity). If I spend 2,000 on my loan (since it was my own money) the balance will change to 17,000=10,000+7,000. I feel like it should change my balance to 13,000= 8,000+5,000 though because I would be reducing the amount on my loan then causing the assets to drop, but then I would be leaving out the fact that I increased my equity to \$7,000. So would this be a situation where it would increase or decrease? I do agree that the the sides will balance out I am just not sure in which direction they should go. I buy a stapler for \$5 (asset) I needed to borrow \$3(liabilities) from a friend then spend \$2 of my own money (equity) then I spend \$2 more dollars on staples. 5=3+2 to 7=3+4 So to answer my own question from the above paragraph..the Equity and Assets would increase with the car scenario. My Response Hi Emily, I sat and read your post like 7 times and confused myself. As far as the stapler is concerned, and correct me if I am wrong, the accounting equation would be \$5=\$3+\$2, so the asset equation is in balance. You bought the stapler for \$5 (assets) = You borrowed \$3 from a friend (liability) + you paid \$2 of your own money (owner’s equity), correct? If that is the case, you only need to borrow \$1 (\$5 = \$1+\$4). In the situation with your car, I would think that the asset increased by \$2,000, and the equity increased by the same amount, with the liability staying the same. So, from what I see, the change would be from \$15,000 asset = \$10,000 liability + \$5,000 equity to \$17,000 asset = \$10,000 liability + \$7,000 equity, so I

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don’t see where you paid on the loan (liability), but only added \$2,000 to the equity, which increased the asset by \$2,000. The asset increased but the loan did not increase or decrease so yes, the equity and the asset make the accounting equation to balance in this scenario. According to the video we watched the accounting equation must always balance. I am attempting to decipher the accounting basics please correct me if I am wrong. Good Point, it made me think. Mattfisher64 [Screen name]. (2010, May 17) Accounting Equation - Ch. 1 Video 1 [Video file]. Video File Discussion 2 What does the term account mean? What are the different classifications of accounts? How do the rules for debits and credits impact accounts? Please provide an example of how debits and credits impact accounts.
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• Fall '10
• RobertCarr
• Accounting, Balance Sheet, Generally Accepted Accounting Principles, Double-entry bookkeeping system, Wainwright

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