Expanded accounting equation
Expanded accounting equation is modified version od basic accounting equation. It replaces owner's equity with more detailed data. The basic accounting equation is:
The expanded accounting equation is:
Equation for stock market
In case of listed companies:
- Owner's equity is replaced with Stockholder's Equity,
- Owner's capital is replaced with Contributed capital,
- Owner's draws are replaced with Dividends.
Why to use expanded accounting equation?
There are two main purposes of using expanded accounting equation:
- better view of impact of net income on equity,
- better view of results of transactions with owners.
- Chan, J. L. (2008). International public sector accounting standards: conceptual and institutional issues. The Harmonization of Government, 21, 1-15.
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