ACCOUNTING EQUATION Definition

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ACCOUNTING EQUATION is a mathematical expression used to describe the relationship between the assets, liabilities and owners equity of the business model. The basic accounting equation states that assets equal liabilities and owners equity, but can be modified by operations applied to both sides of the equation, e.g., assets minus liabilities equal owners equity.

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YTM see YIELD TO MATURITY.

ALLOWANCE METHOD is the accepted way to account for bad debt. Bad debt expense may be based on the percent of credit sales for the period, an aging of the accounts receivable balance at the end of the period, or some other method, e.g., percent of accounts receivable.

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