It should be noted that (typically) the Balance reports an 'As Of' date (versus a specific period, such as a month, quarter or year), meaning that all balances being reported (including Revenues & Expenses) are from inception through the report date. When reported on the Balance Sheet, R&E are netted to Capital as either Net Profit or Net Loss as of the Balance Sheet (BS) reporting date. But you were looking for a way to gives a good response, however, I would differ on the concept that Revenue and Expenses are not part of the accounting equation in that these two elements are (conceptually, anyway) 'sub-classes' to the Capital side of the equation. There is no change to revenue or expenses in this example.īut to continue with the last two rules: |-REVENUE-| minus |-EXPENSE-| = |-PROFIT-| If you get a loan Assets go up, you got cash but Liabilities go up becasue you have to pay it back. Some entries will be echoed in the Revenue and Expenses but not all will be. Revenue and Expenses are not a part of the accounting equation. So it appears if they are on the right side they make sense Debit = minus, if they are on the left they are the opposite. |Credit| Debit| |Debit |Credit| |Debit |Credit| Looking at the first 3 rules and the accounting equation: |-ASSETS-| = |-LIABILITIES-| + |-CAPITAL-|
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