Expanded Accounting Equation
Expanded Accounting Equation is just the further explanation of Owners’ Equity . The Original Accounting Equation is: Assets = Liabilities + Owners’ Equit y Expanded Accounting Equation for Sole Owner or Sole Proprietor or Entrepreneur or Firm is: Assets = Liabilities + Owners’ Equity + Revenues - Expenses - Drawings We know that all the Expenses and Revenues are the results of profitable activities of the business carrying on by the Owner / Entrepreneur or Firm or Company. Also, all expenses are incurred for the purpose of earning revenue and ultimately business gets legal profits. Expenses decreases the Owners’ Equity and Income increases it. An owner of the business also draws some amount from the business for his / her personal use that is known as D rawings . Expanded Accounting Equation for a Company / Corporation is: Assets = Liabilities + Paid-UP-Capital + Revenues - E...