Expanded Equation Income Statement

The components of equity include contributed capital retained earnings.

Expanded equation income statement. The income statement follows a basic equation format that considers revenues and expenses. The equation differs slightly in case of a proprietary concern partnership firm and corporation. Businesses earn revenues by providing services such as carpet. The expanded accounting equation shows the relationship between the income statement and the statement of financial position by illustrating how revenues and expenses of a company drift into the equity of a company s accounting statements.

Instead of the accounting equation assets liabilities owner s equity the expanded accounting equation is. The eight transactions that we had listed under the basic accounting equation transaction 8 are shown in the following expanded accounting equation. Assets owner s capital drawings liabilities income expenses. Understanding the expanded accounting equation the expanded accounting equation is broken down to be.

The expanded accounting equation is the same as the common accounting equation but decomposes equity into component parts. The expanded accounting equation is generally different for varying forms of businesses. For a proprietary concern the equation will be. Assets liabilities share capital retained earnings.

The expanded accounting equation allows you to see separately 1 the impact on equity from net income increased by revenues decreased by expenses and 2 the effect of transactions with owners draws dividends sale or purchase of ownership interest. The expanded accounting equation for a corporation is. Revenues revenues represent the money earned from customers. Assets liabilities paid in capital revenues expenses dividends treasury stock.

The expanded accounting equation will further break them down.