Question

The owner of a business invested $5,000 in the business. what are the effects on the fundamental accounting equation?

Answer 1

The owner of a business invested $5,000 in the business. Total assets and liabilities increase on the fundamental accounting equation.

What are assets ?

Financial accounting classifies as an asset any resource that a business or other economic organization owns or manages. Anything that has the potential to provide positive economic value qualifies. The ownership value that can be turned into cash is represented by assets.

What are liability ?

A liability is defined in financial accounting as the future economic advantages that an entity must forgo for other entities as a result of previous transactions or other previous events.

Difference between asset and liability

Any possessions that could possibly result in future financial gain are considered a company's assets. Your debts to other people are called liabilities.

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