Basic Accounting Concepts - what am I missing?

Derek Atkins warlord at MIT.EDU
Mon Jan 3 12:13:18 EST 2011


Jim Smith <jimsmth761 at> writes:

> Jim,
> I think we all agree that this equation is the starting point (i.e., it is
> correct):
>  (Assets-Liabilities)=Equity+(Income-Expenses)

Nope, that is not correct.  You have the sign backwards.

Equity = Assets - Liabilities + Income - Expenses.

Increasing Income increases Equity.  As does increasing Assets.  So in
your equation it should be:


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       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
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