Subject:
AccountancyAuthor:
alejandrojordanCreated:
1 year agoExplanation:
Statement showing the effect of various transactions on Accounting Equation
Author:
neil14j1
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1Accounting Equation is Asset = Liability + Capital.
As we have to show effect of each transaction through accounting equation.
A - Business satrted with cash 1,00,000
Cash = Liability + Capital
1,00,0000 = Liability + 1,00,000
As bsuiness is started with cash so cash is increasing and this is capital also as it is invested in the business which will be repayed when business will end .
B - Cash Purchase 50,000
Cash + Purchase = Liability + Capital
50,000 + 50,0000 = Liability + 1,00,000
As we have purchased which is our asset so it nis increased and for purchasing goods we have given cash so it has reduced .
C - Cash Sale of 60,000
Cash = Liability + Capital
50,000 + 60,000 = 1,10,000
As we have sold our stock more than of its value so it is profit and it has been added to capital and cash has increased as sales is done for cash and purchases is now zero as it is sold out.
Author:
adamdavis
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