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    rmedina's Avatar
    rmedina Posts: 6, Reputation: 1
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    #1

    Apr 23, 2009, 11:27 AM
    expanded accounting equation
    On the expanded accounting equation Assets = Liabilities + Owners capital-expenses-owners draws I need to complete the amount missing.

    case 1-Asstes 23,000 Liabilities 11,000, capital stock (A) retained earnings 4,500. I am confused on where to place the retained earnings.
    Is my answer 12,000 for capital stock corrrect?
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #2

    Apr 23, 2009, 03:44 PM

    It makes more sense if you do the equation:
    Assets = Liabilities + Equity

    This keeps you open to dealing with "equity" using either a sole proprietorship or corporation. The way you've got it is like for a sole proprietorship.

    In a corporation, "equity" consists of the stock and the retained earnings. So the retained earnings of 4500 is part of the equity. So that gets included in the right side of the equation. With that info you should be able to do this.
    satyanarayanara's Avatar
    satyanarayanara Posts: 11, Reputation: 0
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    #3

    May 1, 2009, 05:19 AM

    According to the Equation the assets must be equal to Liabilities
    Hence
    Assets 23000
    Liabilities 11000
    Retained earnings 4500
    Capital stock 7500
    So according to your answer Capital stock is inclusive of retained earnings
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