Accounting Equation
What is Accounting Equation ?
Dual principle of accounting states that every transaction has two fold
impact, i.e it impacts at least two accounts. Accounting equation ,
represents this dual principle of accounting, and it is generally written
as under : –
Assets = Liabilities + Capital
The accounting equation basically represents, that the Assets of the
business, are always equal to the liabilities of the business to the
outsiders (Liabilities), and the liabilities of the business to the Owners
(“Capital”). Any transaction that a business may undertake, will always
have an impact on the two sides in such a manner, that the equality of
two sides is maintained at all times.
Q.1 What will be effect of the following on the Accounting
Equation?
(i) Started business with cash ₹ 45,000
(ii) Opened a Bank Account with a deposit of ₹ 4,500
(iii) Bought goods from M\s. Sun & Co. for ₹ 11,200
The solution for this question is as follows:
, Therefore,
Liabilities = 11,200
Capital = 45,000
Assets = Liabilities + Capital
What is Accounting Equation ?
Dual principle of accounting states that every transaction has two fold
impact, i.e it impacts at least two accounts. Accounting equation ,
represents this dual principle of accounting, and it is generally written
as under : –
Assets = Liabilities + Capital
The accounting equation basically represents, that the Assets of the
business, are always equal to the liabilities of the business to the
outsiders (Liabilities), and the liabilities of the business to the Owners
(“Capital”). Any transaction that a business may undertake, will always
have an impact on the two sides in such a manner, that the equality of
two sides is maintained at all times.
Q.1 What will be effect of the following on the Accounting
Equation?
(i) Started business with cash ₹ 45,000
(ii) Opened a Bank Account with a deposit of ₹ 4,500
(iii) Bought goods from M\s. Sun & Co. for ₹ 11,200
The solution for this question is as follows:
, Therefore,
Liabilities = 11,200
Capital = 45,000
Assets = Liabilities + Capital
