Problem – Algebra – Accounting Applications
In this problem, we walk through a word problem involving an accounting application in which we must calculate changes in owner’s equity based on information given about its assets and liabilities and their changes over the year.
These problems can be tricky. The thing to keep in mind is that balance sheets reflect the financial state of a firm at a single point in time. Not a period of time, like income statements or cashflow statements. When you’re given information about change in assets, for example, it is not listed on the balance sheet, itself; you have to find another way to diagram it. In the tutorial, I used arrows to indicate the change, but anything will do, so long as it doesn’t end up on the sheet itself.
Would you like to see additional tutorials on application problems in accounting? What would you like to see?