## Cash in Balance Sheet

In this case, Cash and Earnings accounts are calculated as follows:

• Cash = revenue – expenses = 15,000\$ – 5,000\$ = 10,000\$
• Earnings = revenue – expenses = 15,000\$ – 5,000\$ = 10,000\$

## Liabilities in Personal Balance Sheet

Now, Cash and Earnings accounts are calculated as follows:

• Cash = revenue – expenses + loan = 15,000\$ – 5,000\$ + 14,000\$ = 24,000\$
• Earnings = revenue – expenses = 15,000\$ – 5,000\$ = 10,000\$

## Assets in Personal Balance Sheet

When it’s enough cash in our balance, we can make capital expenditure and buy an asset. We will consider a car as an example. Figure 3 shows the state of the personal balance sheet when the deal is made, the seller received the money, and we own the car.

Take a look at Cash and Earnings accounts calculations:

• Cash = Earnings + loan – car = 10,000\$ + 14,000\$ – 22,000 = 2,000\$
• Earnings = revenue – expenses = 15,000\$ – 5,000\$ = 10,000\$

As you see, there is a straight logic in Cash equation: earned money, got a loan, and bought a car.