Is Accounting Equation an Ideal or Reality?

by SteveJ
(UK)

Is B/S 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.

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Dec 10, 2017
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Balance Sheet Accounting Equation Reality
by: Stephanie

Thank you for your question about whether or not the balance sheet accounting equation is an ideal or a reality and sharing your experience.

The balance sheet is supposed to be a realistic summary of your companies financial status showing all of your assets, liabilities and equity at a particular point in time.

It lets investors have a better idea of what a company owns versus owes in addition to how much has been invested or taken out by investors.

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