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y An accounting equation is statement of equality
between the resources and the sources which finance
the resources and is expressed as follows




 



 
 


yAssets
y Two major asset classes are tangible assets and intangible assets.
y Tangible assets contain various subclasses, including current
assets and fixed assets.
y Current assets include inventory, while fixed assets include such
items as building and equipment
y Intangible assets are nonphysical resources and rights that have a
value to the firm because they give the firm some kind of
advantage in the market place. Examples of intangible assets are
goodwill, copyrights, trademarks, & patents
 „





y An  

 that legally binds an


 or
 to
 a  . When one


  for a debt,
they are responsible for paying the debt or settling a
wrongful they may have committed.
y |or example, if Arpit á

?mithǯs car, Arpit is liable
for the 
to ?mith's vehicle because Arpit is
responsible for the damages. In the case of a company,
a 


 is recorded on the  
á  and can
include 
  

,  
 

    
 




are
 
  within   , while  





are  
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y Capital may refer to money used by
entrepreneurs and businesses to buy
what they need to make their products
or provide their services or to that
sector of the economy based on its
operation, i.e. retail, corporate,
investment banking, etc.
r 

yExpenses reduces amount of
capital.
yIncome increases amount of
capital.
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Assets= Liabilities+ Capital
Cash 10000 - Capital 15000
?tock 2000 -
|urniture 3000 -

15000 Nil 15000

yVought goods of Rs 4000
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Assets = Liabilities + Capital

Cash 6000 - Capital 15000
?tock 6000 -
|urniture 3000 -

15000 Nil 15000

y?old goods of Rs 3000 for Rs 2000

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Assets = Liabilities + Capital

Cash 8000 - Capital 15000
?tock 3000 - Loss 1000
|urniture 3000 -

14000 Nil 14000

ymurchased goods of Rs 6000 on
credit
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Assets = Liabilities + Capital

Cash 8000 Creditors 6000 Capital 14000
?tock 9000
|urniture 3000

20000 6000 14000

y?old goods of Rs 3000 on credit for
Rs 5000
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Assets = Liabilities + Capital
Cash 8000 Creditors 6000 Capital 14000
?tock 6000 mrofit 2000
|urniture 3000
Debtors 5000

22000 6000 16000

yWithdrawn for household use
goods of Rs 1000 & cash of Rs 2000
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Assets = Liabilities + Capital

Cash 6000 Creditors 6000 Capital 16000
?tock 5000 Drawings 3000
|urniture 3000
Debtors 5000

19000 6000 13000

 ymaid for salary Rs 1500 &
for wages Rs 500
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Assets = Liabilities + Capital
Cash 4000 Creditors 6000 Capital 13000
?tock 5000 (-)?alary 1500
|urniture 3000 (-)Wages 500
Debtors 5000

17000 6000 11000

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Assets = Liabilities + Capital

Cash 7000 Creditors 6000 Capital 11000
?tock 5000 (+)commission 2000
|urniture 3000 (+)interest
1000
Debtors 5000

20000 6000 14000

 y 6pened a current account in bank &
deposited Rs 4000 in cash

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Assets = Liabilities + Capital

Cash 3000 Creditors 6000 Capital 14000
?tock 5000
|urniture 3000
Debtors 5000
Vank 4000

20000 6000 14000

 y coods of Rs 2000 & cash of Rs 1000 are
stolen away
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Assets = Liabilities + Capital

Cash 2000 Creditors 6000 Capital 14000
?tock 3000 (-)loss by theft 3000
|urniture 3000
Debtors 5000
Vank 4000

17000 6000 11000

 y coods burnt of Rs 1000

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Assets = Liabilities + Capital

Cash 2000 Creditors 6000 Capital 11000
?tock 2000 (-)loss by fire 1000
|urniture 3000
Debtors 5000
Vank 4000

16000 6000 10000

 y Loan borrowed of Rs 5000

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Assets = Liabilities + Capital

Cash 7000 Creditors 6000 Capital 10000
?tock 2000 Loan 5000
|urniture 3000
Debtors 5000
Vank 4000

21000 11000 10000

 y Loan repaid Rs 1000 in cash & Rs 2000
through cheque
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Assets = Liabilities + Capital

Cash 6000 Creditors 6000 Capital 10000
?tock 2000 Loan 2000
|urniture 3000
Debtors 5000
Vank 2000

18000 8000 10000