Question

What are the three components of a basic accounting equation? Should a basic accounting formula balance at all times ? If yes explain the reason if it does not balance what does this mean

Answer 1

answer from edmentum/plato

Step-by-step explanation:

The basic accounting equation shows an interrelationship between three main components: assets = liabilities + owners’ equity. Any accounting transaction has a dual effect on this equation; that is, it changes two of the three components. Because of the double-entry nature of accounting, the equation should always balance. Because all debits are equal to credits, both sides of the equation should be equal to each other. If the accounting formula or equation does not balance, it means that there was a mistake in the recording of the accounting data. You must analyze the accounting information again in order to make the necessary corrections to balance the equation.

Answer 2

The formula is: Assets = Liabilities + Shareholders' Equity. The three components of the basic accounting formula are: Assets. These are the tangible and intangible assets of a business, such as cash, accounts receivable, inventory, and fixed assets