Meaning of
accounting Equation:-
Accounting equation means the total assets of the business are always equal
to the total capital & liabilities.
Formula:-
Assets = Liabilities + Capital
A = L + C
|
Accounting Equation is based on the Dual Aspect of Accounting which holds
that for every debit or credit, there is equal credit or debit.
Clarification of Accounting Equation with Examples:-
Transaction- I
Mr. Kaushal started a
business with ₹ 10,000/-
Soln:-
Accounting equation are
following:-
Assets
Cash
|
Capital +Liabilities
|
10,000
|
10,000 + 0
|
Total 10,000
|
Total 10,000
|
Transaction- II
He Purchases goods ₹
4,000/- and furniture ₹ 1,000/- for cash.
Soln:-
Accounting
equation are following:-
Assets
Cash + Stock
+ Furniture
|
Capital +Liabilities
|
Old Eqn.10,000 + 0
+ 0
|
10,000 + 0
|
Tran. (-) 5,000 + 4,000
+ 1,000
|
0 + 0
|
New Eqn. 5,000 + 4,000 + 1,000
|
10,000
+0
|
Total 10,000
|
Total 10,000
|
Transaction- III
Mr. Kaushal Purchases
goods ₹ 3,000/- on credit.
Soln:-
Accounting equation
are following:-
Assets
Cash +
Stock + Furniture
|
Capital +Liabilities
Capital + Creditor
|
Old Eqn. 5,000 + 4,000
+ 1,000
|
10,000 + 0
|
Tran. 0 + 3,000 + 0
|
0 + 3,000
|
New Eqn. 5,000 + 7,000 + 1,000
|
10,000 +
3,000
|
Total 13,000
|
Total 13,000
|
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