#cfa-level-1 #reading-23-financial-reporting-mechanics
The basic accounting equation reflected in the balance sheet (Assets = Liabilities + Owners’ equity) implies that every recorded transaction affects at least two accounts in order to keep the equation in balance, hence the term
double-entry accounting
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3.2. Accounting Equations.
Statement of Retained Earnings Year Ended 31 December 20X1 Beginning retained earnings 250 Plus net income 200 Minus dividends 0 Ending retained earnings 450
<span>The basic accounting equation reflected in the balance sheet (Assets = Liabilities + Owners’ equity) implies that every recorded transaction affects at least two accounts in order to keep the equation in balance, hence the term double-entry accounting that is sometimes used to describe the accounting process. For example, the use of cash to purchase equipment affects two accounts (both asset accounts): cash decreases and equipment i Summary
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