WSEAS Transactions on Business and Economics
Print ISSN: 1109-9526, E-ISSN: 2224-2899
Volume 13, 2016
Assets Value Change in the Accounting Equation
Author: Fernando Juárez
Abstract: The purpose of the study is to analyze the accounting equation and the relationship between assets and claims on assets (liabilities plus stockholders’ equity), based on the dual concept of monetary units. The method is rationalistic, analytical and deductive, focusing on the implications that the dual concept has for the accounting equation. The analysis consists of the application of the identity and characteristic functions along with a coordinate transformation, to show that the assets-claims on assets relationship involves a change in assets value. The identity function represents the dual concept of monetary unit and the characteristic function relates both sides of the equation linking accounts whose units are partially identical. A reformulation of the accounting equation is made; the new equation has different number of terms on each side. Finally, a coordinate transformation for the assets side terms is done. Results show that the accounting equation consists of a series of addition functions, which take into account the dual concept of monetary units. A different number of coordinate dimensions arises on each side of the final equation, and a coordinate transformation is applied to have both sides of the equation with two dimensions. This transformation results in a change in the value of assets.
Keywords: Dual aspects, accounting transactions, accounting equation, balance sheet
Pages: 384-392WSEAS Transactions on Business and Economics, ISSN / E-ISSN: 1109-9526 / 2224-2899, Volume 13, 2016, Art. #35