Basic Accounting Concepts - what am I missing?

Ryan Flegel rflegel at
Sun Jan 2 00:00:20 EST 2011

On 1 January 2011 22:50, Jim Smith <jimsmth761 at> wrote:
> When one writes the Accounting Equation in the form shown below, it
> doesn't make any sense to me.
> (Assets - Liabilities) + (Expenses - Income) = Equity
> If I start off with 1 million in assets and no liabilities and then I
> encounter 1 million in expenses and have no income, I should end up
> with zero equity. The equation makes it seem like this scenario would
> give me 2 million in equity.
> What am I missing?

You've got it mixed up I think. It should be:

(Assets - Liabilities) - (Expenses - Income) = Equity

Note the subtraction of (Expenses - Income) instead of addition.


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