a. The accounting equation is Assets = Liabilities + Owner’s Equity, the foundation of double-entry accounting. It shows the business’s resources (assets) are financed by creditors (liabilities) or owners (equity). Every transaction affects at least two elements, keeping balance.

Expansion: Assets (e.g., cash, inventory); Liabilities (e.g., loans); Equity (capital + profits – drawings). In Ghana, BoG requires balanced sheets under Act 930 for solvency. Example: Bank lending increases assets (loans) and liabilities (deposits) or equity (profits). Post-2019 cleanup, equation helped assess recapitalization (e.g., increasing equity via injections).

Practical: In Galamsey Ltd, initial capital: Assets (cash +4,000) = Equity +4,000. Ensures accurate reporting for decisions, compliance.

b. Depreciation: Systematic allocation of tangible fixed asset cost over useful life due to wear (e.g., vehicles, IAS 16 straight-line).

Depletion: Allocation for natural resources based on extraction (e.g., mining reserves, units-of-production method).

Amortization: Allocation for intangibles (e.g., leasehold, patents, over time, IAS 38).

All match costs to revenues (matching concept), but differ by asset type: physical (depr.), extractive (depl.), non-physical (amort.).