Accounting Equation

lingwitt at bellsouth.net lingwitt at bellsouth.net
Sat Jun 30 01:54:54 EDT 2007


Hello,

I don't have any credentials and my arithmetic is terrible,
but it seems to me like the documentation's development
of the accounting equation is completely wrong.

This makes sense:

	Assets - Liabilities = Equity
	
But then it says:

	"Furthermore, you can increase your equity through
	income, and decrease equity through expenses."
	
So for income:
	
	EquityWithIncomeAndExpenses = Equity + Income - Expenses
	
or
	
	EquityWithIncomeAndExpenses = Assets - Liabilities + Income - Expenses

If we just refer to EquityWithIncomeAndExpenses as Equity, then:
	
	Equity  = Assets - Liabilities + Income - Expenses
	
or
	
	Assets - Liabilities = Equity - (Income - Expenses)

but the docs say:

	Assets - Liabilities = Equity + (Income - Expenses)
	
That is, the docs say:
	
	(Assets - Income) - (Liabilities - Expenses) = Equity

and I say this:
	
	(Assets + Income) - (Liabilities + Expenses) = Equity

Clearly the latter is correct.

Why not dispel with Income and Expenses anyway and just
call them Assets and Liabilities?

Please correct me (I'm serious).


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