What is the Expanded Accounting Equation for a Corporation?
In understanding the expanded accounting equation for a corporation, you will have to keep in mind that the corporation has a separate identity. All assets will be recognized as owned by the stockholders of the corporations. On the other hand, all liabilities will have first priority over the assets before the stockholders’ rights of ownership are applied. Ownership rights will be evidenced by shares of stocks while the stock issued by the company will be limited up to the amount approved by the U.S. Securities and Exchange Commission as Authorized Capital Stocks. The accounting for assets and liabilities of the corporation is generally the same as that of a sole proprietorship except for other investment transactions the corporations may enter into or offer as investments. Examples of these are long-term or short–term bonds. Recognition of revenues and expenses will also be based on the accounting principles of matching income and expenses. Most of the differences in corporate account
