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Legal
Dedicated
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Chapter 13
Chapter 14
Chapter 15
Chapter 16
Chapter 17
Chapter 18
Chapter 19
Chapter 20
Chapter 21
Chapter 22
Chapter 23
Chapter 24
Chapter 25
Chapter 26
Chapter 27
Chapter 28
Glossary
Error
Messages

Changing net worth

Some transactions change the net asset value of the company, and some don’t.  In order to succinctly state the distinction, the accounting equation is stated again, in a somewhat awkward form:

            Equity + Revenue - Expenses = Assets - Liabilities.

This says that the “Closing the Books” action above merely recognized what revenue and expenses were doing to equity. 

How can we tell if a transaction affects net worth?  Does it affect accounts on both sides of the equation?  If so, it changes net worth.  If it involves only accounts on one side of the equation, it does not change net worth.

The remainder of this chapter is designed for random access.  While the transactions in the table do relate to each other, each one can stand alone.