What is basic accounting formula?

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I know that there is a basic accounting formula that is used. Do you know what is this formula and how I can further expand it into more detailed accounts?

1 Answer

score 0 · Answer 1 · 2012-12-02T18:42:21+00:00

The basic accounting formula is as follows:

Liabilities + Equity =Assets.

You can further analyse the equity as follows:

Equity= Capital Contribution + Retained Earnings.

You can also further break down the retained earnings as follows:

Retained Earnings=Profits from previous year+ Net profit for this year-Dividends paid