Foo - Assets = Liabilities + Owners Equity

Bikeforums.net is a forum about nothing but bikes. Our community can help you find information about hard-to-find and localized information like bicycle tours, specialties like where in your area to have your recumbent bike serviced, or what are the best bicycle tires and seats for the activities you use your bike for.



PDA
reich17
01-08-07, 07:46 AM
I don't understand why, using the above equation, that when a customer is billed it falls under revenue for owners equity and accounts receivable is an asset. I would think a customer billing and accounts receivable are pretty darn close to the same thing????????????

reich17
01-08-07, 11:00 AM
Did I bungle my question or are all the accountants actually working right now (unlike me)?
chipcom
01-08-07, 11:17 AM
Yes you did. I'm not an accountant, but I do understand what a balance sheet is, which is what your equation refers to. Use a little basic algebra to rearrange the equation and you might understand it better: Owners Equity = Assets - Liabilities.

BroMax
01-08-07, 12:31 PM
You know what really seems backwards until you get used to it?

When cash comes into your enterprise it is a debit to the cash account.

When cash is paid out it is a credit to the cash account.

Double entry bookkeeping is elegantly designed: it was invented by Italians.
Johnny_Monkey
01-08-07, 03:20 PM
The full equation is: Assets + expenses = revenue + OE + liabilities.

Accounts receivable is a Dr balance sheet account

Sales is a Cr Profit & Loss account.

When a sale is made it is:

Dr Accounts Receivable
Cr Sales

When the cash is received from the debtor:

Cr Accounts Receivable
Dr Bank.