>> August 22, 2010
If someone asks me about the creative ways to teach accounting equation, I can give the answer with following way.
1. Assets always equals to liabilities.
Total Assets = Liabilities + Capital
Capital = Assets - Liabilities
2. Student can ask why assets always equals to liabilities. Ans. because, initial capital will be transfer from one asset to other asset and also other debt liabilities will be transfer from one asset to another asset or capital may transfer to liabilities or liabilities can be transferred into capital. All things, will only answer, asset = capital + debt liabilities.
3. Assets are just like your rights but you will have also same responsibilities which are the liabilities.
4. Just go to white board and write assets = liabilities, is very easy. But to teach this accounting equation, you have to use your brain. You can say, " Dear students, go to market and see different shops. You will see stock, shop building and other equipments. All these things are assets. You know how all these things in that shop. All these things in shop because, his businessman has invested his money for buying them. It means, capital is behind all these things. If you buy any thing, either your capital may be affected or not but both side of accounting equation will be affected. Because, all money is not of businessman, some money is borrowed by businessman.
5. Always, remember that every transaction will be adjustify by increasing and decreasing two items of one side of accounting equation or two side of accounting equation but in end balance of accounting equation will be equal.
Related : Is There a Fun way to Teach Basic Accounting?
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