Basic Accounting Equation

The basic accounting equation upon which the final accounts are prepare encompasses the following: Assets minus Liabilities = Ownership Interest The Balance Sheet is the key financial report that portrays the accounting equation, which will be utilized to compute the accounting equation for the companies at hand.Accounting Equation in McDonald’s Annual Report (2007) Assets: Property, plant and equipment $20,984. 70 million Current Assets $ 3,581. 90 million Other Assets $ 4,825. 10 million Total Assets $29,391. 70 million Liabilities: Non-Current Liabilities (note 1) $ 9,613.40 million Current Liabilities $ 4,498. 50 million Total Liabilities $14,111. 90 million Ownership Interest $15,279. 80 million Note: ownership interest is represented by total shareholders’ equity in the Balance Sheet. Note 1 – Computation of Non-Current Liabilities: Long-Term Debt $7,310. 0 million Other Long-Term Liabilities $1,342. 5 million Deferred Taxation $ 960. 9 million Non-Current Liabilities $9,613. 4 million Accounting Equation in Triarc Companies Incorporation (2007) Assets: Non-Current Assets $1,284,313,000 Current Assets $ 170,254,000Total Assets $1,454,567,000 Liabilities: Non-Current Liabilities (see note 2) $ 798,530,000 Current Liabilities $ 207,163,000 Total Liabilities $1,005,693,000 Ownership Interest $448,874,000 Note: ownership interest is represented by total stockholders’ equity in the Balance Sheet. Note 2 – Computation of Non-Current Liabilities Long-Term Debt $711,531,000 Deferred Income $ 10,861,000 Minority interest in consolidated subsidiaries $ 958,000 Other Liabilities $ 75,180,000 Non-Current Liabilities $798,530,000Under both organisations the same accounting equation is utilised and the same components taken. This uniformity is important in accounting in order to ensure comparability. In addition with the aid of such accounting equation a uniform structure is given to the Balance Sheet, which is an important medium for pertinent stakeholders to assess the financial position and stability of the organization. As one can note the assets section is classified between current and non-current assets, while the liabilities are divided between current and non-current liabilities.The subtraction between the two will results in the ownership interest. This basically comprises the equity capital of the company together with capital and revenue/capital reserves. Such features are present both for McDonald’s Corporation and Triarc Companies Incorporation. In addition such features will also be present in the majority of limited liability companies set across the globe. The Balance Sheet is the main medium that one can utilize to identify the assets, liabilities and ownership interest of the companies.The additional notes in the financial statements serve as detail specification on certain assets and liability elements. However, the accounting equation being generic in its nature does not necessitate t hat one enters into such details. In this respect the Balance Sheet was the main medium utilised to put in practice the accounting equation for McDonald’s Corporation and Triarc Companies Incorporation. Reference: Weetman P. (2003). Financial and Management Accounting. Third Edition. New York: Prentice Hall.