Advertisements
Advertisements
Question
Write a brief note on accounting equation approach of recording transactions.
Advertisements
Solution
The relationship of assets with that of liabilities to outsiders and to owners in the equation form is known as the accounting equation.
Under the double entry system of book keeping, every transaction has a two-fold effect, which causes the changes in assets and liabilities or capital in such a way that an accounting equation is completed and equated.
Capital + Liabilities = Assets
Capital can also be called as owner’s equity and liabilities as outsider’s equity.
APPEARS IN
RELATED QUESTIONS
The incorrect accounting equation is _____________.
Real account deals with ____________.
Prepaid rent is a ____________.
Write any one transaction which decreases the assets and decreases the liabilities
Write any one transaction which increases one asset and decreases another asset
What is an Account?
Classify the accounts with suitable examples.
Complete the accounting equation.
Assets = Capital + Liabilities
₹ 1,00,000 = ₹ 80,000 + ?
Complete the accounting equation.
Assets = Capital + Creditors
? = ₹ 1, 60,000 + ₹ 80,000
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
