Theory
The basic accounting equation is assets = liabilities + equity. This is the Statement of Financial Position (It is the new name of Balance Sheet according to IFRS). The foundation for the balance sheet begins with the income statement, which is revenues - expenses = net income or net loss. This is followed by the retained earnings statement, which is beginning retained earnings + net income + additional capital(capital contribution) - dividends/drawings = ending retained earnings.
Read more about this topic: Accountancy
Famous quotes containing the word theory:
“The theory of the Communists may be summed up in the single sentence: Abolition of private property.”
—Karl Marx (1818–1883)
“Every theory is a self-fulfilling prophecy that orders experience into the framework it provides.”
—Ruth Hubbard (b. 1924)
“No one thinks anything silly is suitable when they are an adolescent. Such an enormous share of their own behavior is silly that they lose all proper perspective on silliness, like a baker who is nauseated by the sight of his own eclairs. This provides another good argument for the emerging theory that the best use of cryogenics is to freeze all human beings when they are between the ages of twelve and nineteen.”
—Anna Quindlen (20th century)