Why the Basic Accounting Equation Is the Foundation of Your Accounting Degree
August 14, 2012
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You’ve heard that the basic accounting equation is central to your degree. It’s the simple equation, Assets = Liabilities + Equity. But did you know that you could be using this basic equation for the rest of your educational and professional life? Learn more about how this easy equation can rule an accountant’s future.
It Affects Everything
If you were told that the basic accounting equation is important, that was an understatement. The above equation is part of every business transaction. In any transaction, at least two parts of the equation are affected. This means the equation should always be in balance. When businesses keep track of their transactions with the basic accounting equation, they can know the value of their various assets, liabilities, and equities at all times.
The Equation and Your Education
Now you understand that the basic accounting equation is vital to all accounting procedures. But it’s fairly simple; how can it affect your whole education? Balancing the equation isn’t always easy to understand. Much of your accounting education can be spent learning the different ways the equation can be balanced. Here are some complications you could encounter:
- Different types of equity (owner’s, stockholder’s, etc.)
- Interest, tax, wages, and loan liabilities
- Double entry accounting
It can always be helpful to brush up on your basic accounting equation knowledge so you have a good understanding of its variations and complications. The equation plays a role in all parts of accounting, and accounting students who have a good grasp of it can be better prepared for future accounting positions.
If you’re looking for a focused and dedicated accounting education, learn more about a dynamic accounting degree program.
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