Is Accounting Equation an Ideal or Reality?
Is B/S Accounting Equation an Ideal or Reality?
I have a situation where my business went through a reasonable period. It has recently not been doing well.
In the good times I bought assets which went on the book and have gradually depreciated.
I've never owed money (except chump-change on credit cards; paid off monthly) and never paid myself money I didn't have. The bank balance has always been in the black.
Yet the only way I can get things to balance on returns to state organizations is to effectively issue shares to myself which allows money to come in.
Part of this feels like I'm paying for asset depreciation - which seems stupid as I have already paid for the assets once in reality (work tools in this case).
To me the equation seems totally artificial and not connected to my reality.
Please subscribe to my monthly newsletter, Bookkeeping Basics E-zine. It tells you each month about the new information that I have added, including some great tips and advice from myself and other Bookkeeping Basics readers.