Question

Justify the accounting equation

Answer 1

Accounting equation signifies that the asset of a business are always equal to the total of capital and liabilities. A business transaction will result in the change in either of the asset,liabilities or capital of the firm and even after the change the asset will be again equal to the total of capital and liabilities. if a business transaction results in the increase of assets, there will also be a corresponding increase in the amount of either capital or liabilities by the same amount.
Ex-
1. gopal started business with rs 75000 as capital.
Ans- Asset=liability+capital

cash = liabilities+capital
75000= 0 + 75000

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