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Question
What is the accounting equation?
Solution
The relationship of assets with that of liabilities to outsiders and to owners in the equation form is known as the accounting equation.
The accounting equation is a mathematical expression which shows that the total of assets is equal to the total of liabilities and capital.
This is based on the dual aspect concept of accounting.
This means that the total claims of outsiders and the proprietor against a business enterprise will always be equal to the total assets of the business enterprise.
Capital + Liabilities = Assets
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RELATED QUESTIONS
Real account deals with ____________.
Write any one transaction which decreases the assets and decreases the liabilities
Write any one transaction which increases one asset and decreases another asset
Write a brief note on accounting equation approach of recording transactions.
What is an Account?
Classify the accounts with suitable examples.
Complete the accounting equation.
Assets = Capital + Liabilities
₹ 2,00,000 = ? + ₹ 40,000
For the following transactions, show the effect on the accounting equation.
- Raj started business with cash - ₹ 40,000
- Opened bank account with a deposit of - ₹ 30,000
- Bought goods from Hari on credit for - ₹ 12,000
- Raj withdrew cash for personal use - ₹ 1,000
- Bought furniture by using debit card for - ₹ 10,000
- Sold goods to Murugan and cash received - ₹ 6,000
- Money withdrawn from bank for office use - ₹ 1,000
Prepare accounting equation for the following transactions.
- Murugan commenced business with cash ₹ 80,000
- Purchased goods for cash ₹ 30,000
- Paid salaries by cash ₹ 5,000
- Bought goods from Kumar for ₹ 5,000 and deposited the money in CDM.
- Introduced additional capital of ₹ 10,000
Create an accounting equation on the basis of the following transactions:
- Rakesh started business with a capital of ₹ 1,50,000
- Deposited money with the bank ₹ 80,000
- Purchased goods from Mahesh and paid through debit card ₹ 25,000
- Sold goods (costing ₹ 10,000) to Mohan for ₹ 14,000 who pays through debit card
- Commission received by cheque and deposited the same in the bank ₹ 2,000
- Paid office rent through ECS ₹ 6,000
- Sold goods to Raman for ₹ 15,000 of which ₹ 5,000 was received at once
