{"id":224826,"date":"2025-06-03T14:01:56","date_gmt":"2025-06-03T14:01:56","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=224826"},"modified":"2025-06-03T14:01:58","modified_gmt":"2025-06-03T14:01:58","slug":"completing-the-accounting-equation-with-the-addition-of-temporary-accounts-the-basic-accounting-equation-can-be-expressed-as-follows","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/06\/03\/completing-the-accounting-equation-with-the-addition-of-temporary-accounts-the-basic-accounting-equation-can-be-expressed-as-follows\/","title":{"rendered":"Completing the Accounting Equation With the addition of temporary accounts, the basic accounting equation can be expressed as follows"},"content":{"rendered":"\n

Problem 5-8: Completing the Accounting Equation With the addition of temporary accounts, the basic accounting equation can be expressed as follows: Owner’s Equity = Assets – Liabilities + Owner’s Capital + Withdrawals + Revenue – Expenses Using the expanded equation shown above, determine the missing amounts for the following accounting equations. The first equation is completed as an example: Owner’s Equity = Withdrawals + Revenue + Assets – Liabilities + Owner’s Capital – Expenses 1. Assets =
22,150 3. Owner’s Capital =
49,450 5. Revenue =
72,640 7. Owner’s Equity =
525 9. Revenue =
56,300 11. Liabilities =
21,650 13. Expenses =
20,005 15. Withdrawals =
10,000 17. Liabilities =
4,115 19. Expenses =
9,600 21. Withdrawals =
3,250 23. Liabilities =
16,570 25. Expenses =
42,597 27. Withdrawals =
1,500 29. Liabilities =
10,750 31. Expenses =
1,150 33. Withdrawals =
1,988 35. Liabilities =
67,908 37. Expenses =
40,163 39. Withdrawals =
61,774 (Expenses plus withdrawals equal
50,643.) 10. For equation 7, calculate the sum of owner’s equity at year end.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n

To solve Equation 7<\/strong> and calculate the owner\u2019s equity at year end<\/strong>, we will apply the expanded accounting equation<\/strong>: Assets=Liabilities+Owner\u2019s Capital+Revenues\u2212Expenses\u2212Withdrawals\\text{Assets} = \\text{Liabilities} + \\text{Owner\u2019s Capital} + \\text{Revenues} – \\text{Expenses} – \\text{Withdrawals}<\/p>\n\n\n\n

\n\n\n\n

Given Values in Row 7:<\/strong><\/h3>\n\n\n\n
    \n
  • Liabilities<\/strong> = 1,988<\/li>\n\n\n\n
  • Owner’s Capital<\/strong> = 41,194<\/li>\n\n\n\n
  • Withdrawals<\/strong> = 6,196<\/li>\n\n\n\n
  • Revenue<\/strong> = 52,210<\/li>\n\n\n\n
  • Expenses<\/strong> = 42,597<\/li>\n\n\n\n
  • Assets<\/strong> = Missing<\/em><\/li>\n\n\n\n
  • Owner\u2019s Equity (year end)<\/strong> = To be calculated<\/em><\/li>\n<\/ul>\n\n\n\n
    \n\n\n\n

    Step 1: Calculate Ending Owner\u2019s Equity<\/h3>\n\n\n\n

    Using: Owner\u2019s Equity=Owner\u2019s Capital+Revenue\u2212Expenses\u2212Withdrawals\\text{Owner\u2019s Equity} = \\text{Owner’s Capital} + \\text{Revenue} – \\text{Expenses} – \\text{Withdrawals}<\/p>\n\n\n\n

    Substitute values: Owner\u2019s Equity=41,194+52,210\u221242,597\u22126,196\\text{Owner\u2019s Equity} = 41,194 + 52,210 – 42,597 – 6,196 =93,404\u221248,793=44,611= 93,404 – 48,793 = \\boxed{44,611}<\/p>\n\n\n\n

    \n\n\n\n

    Step 2: Calculate Assets (if needed)<\/h3>\n\n\n\n

    Now use: Assets=Liabilities+Owner\u2019s Equity\\text{Assets} = \\text{Liabilities} + \\text{Owner\u2019s Equity} Assets=1,988+44,611=46,599\\text{Assets} = 1,988 + 44,611 = \\boxed{46,599}<\/p>\n\n\n\n

    \n\n\n\n

    \u2705 Final Answer for Equation 7<\/strong>:<\/h3>\n\n\n\n

    Owner\u2019s Equity at year end = $44,611<\/strong><\/p>\n\n\n\n

    \n\n\n\n

    Explanation <\/strong><\/h3>\n\n\n\n

    In accounting, the expanded accounting equation incorporates both permanent and temporary components of owner’s equity. This includes capital contributed by the owner, revenues earned, expenses incurred, and withdrawals taken during the accounting period.<\/p>\n\n\n\n

    To find the owner\u2019s equity at year-end for Equation 7, we use the formula: Ending Owner\u2019s Equity=Owner\u2019s Capital+Revenues\u2212Expenses\u2212Withdrawals\\text{Ending Owner\u2019s Equity} = \\text{Owner\u2019s Capital} + \\text{Revenues} – \\text{Expenses} – \\text{Withdrawals}<\/p>\n\n\n\n

    This formula reflects the net change in owner\u2019s equity due to business activities. In this case, the owner originally invested $41,194. The business earned revenue of $52,210, which increases equity. However, the business also had $42,597 in expenses and the owner withdrew $6,196, both of which decrease equity. After accounting for these factors, the ending owner\u2019s equity totals $44,611.<\/p>\n\n\n\n

    This figure represents the residual interest in the company\u2019s assets after deducting liabilities. If needed, we can calculate the total assets using the formula: Assets=Liabilities+Owner\u2019s Equity\\text{Assets} = \\text{Liabilities} + \\text{Owner\u2019s Equity}<\/p>\n\n\n\n

    Which yields $46,599. This confirms that the business\u2019s financial position remains solvent, as assets exceed liabilities. Understanding how these elements interact is essential for tracking a company’s financial performance and position throughout the year.<\/p>\n\n\n\n

    \"\"<\/figure>\n\n\n\n

    <\/p>\n","protected":false},"excerpt":{"rendered":"

    Problem 5-8: Completing the Accounting Equation With the addition of temporary accounts, the basic accounting equation can be expressed as follows: Owner’s Equity = Assets – Liabilities + Owner’s Capital + Withdrawals + Revenue – Expenses Using the expanded equation shown above, determine the missing amounts for the following accounting equations. The first equation is […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-224826","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/224826","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=224826"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/224826\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=224826"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=224826"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=224826"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}