Accounting equation(11th A/C)

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Accounting Equation

starting business

cash increase

capital increasewithdrawings

cash cash↓ capital↓

goods stock↓ capital↓

expanses

prepaid cash↓ ppexp(A)↑

paid on time cash↓ capital↓

outstanding o/s liab.↑ capital↓

incomes

recd. in dvance cash↑ recd .adv(L)↑

cash recd. on time cash↑ capital↑

accrued acc.inc(A)↑ capital↑

liabilityloan recd. cash ↑ liab. ↑

loan paid cash↓ liab.↓depreciation

asset decreases

capital decreases

interest

on capital CAPITAL ↓ ↑

on withdrawings CAPITAL ↑ ↓

PURCHASE GOODS

on CASH CASH↓ STOCK ↑

on CREDIT CRDTR ↑STOCK↑

SALES

on CASH

ON PROFIT

CASH↑ STOCK↓CAP↑

ON LOSS CASH↑ STOCK↓CAP↓

on CREDIT

ON PROFIT

DBTR↑ STCK↓CAP↑

ON LOSS DBTR↑ STCK↓CAP↓

C L A

A L C

A C L

Purchase asset for personal use(drw)

cash

capital

decreases

decreases

TA= C+P+L AE is mathematical expression

TE=OE +CE which shows that A AND L of a

OC=CC+D-AC-P firm are equal.

CC=OC+AC+P-D ☺☺☺☺☺☺☺☺☺