Business Transactions And
Changes In The Fundamental Bookkeeping Equation
Business transactions change the fundamental bookkeeping equation. At least two changes occur with each transaction. However, the fundamental equation must always be in balance. Assets must equal liabilities plus owner's equity.
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| Some transactions result in increases on two sides of the equation, for example, an increase in assets, with an increase in either liabilities or owner's equity. Some transactions result in decreases on two sides of the equation, for example, a decrease in assets, with a decrease in either liabilities or owner's equity. Or, some transactions result in an increase and a decrease on the same side of the equation, for example, an increase in one asset, with a decrease in another asset. |  |
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