Account 3 Marks Question

An Accounting Equation is a mathematical expression which shows that the assets and liabilities of a firm are equal. An Accounting Equation is based on the Dual Aspect Concept of accounting meaning, every transaction has dual aspect or two aspects debit and credit. It holds that for every debit there is a credit of equal amount and vic? versa. It means, total claims (those of outsiders and of the proprietors) will always be equal to the total assets of the firm. The claims, also known as equities, are of two types:

1. Owner's equity or capital
2. Liabilities or amounts due to outsiders (i.e., Outsider's Equity).

We can express it mathematically as follows:
Assets = Equities (Total Claims)
OR
Assets = Liabilities + Capital

OR
Liabilities = Assets - Capital

OR
Capital = Assets - Liabilities

Closing Capital is difference between the assets and liabilities. Thus
liabilities = 12,500 (Loan)
and assets = 50000.
Therefore capital = 50,000 - 12,500 = 37,500
Profit = Closing Capital - Opening Capital + Drawings - Additional Capital
Profit = 37,500 - 25,000 + 0 - 0
Profit = 12,500

Assets = 1,12,000 + 10,000 + 30,000 = ₹ 1,52,000
Liabilities = ₹ 30,000
Capital = ₹ 1,22,000

S.no	Assets	=	Liabilities	+	Capital
(i)	₹ 20,000	=	₹ 15,000	+	₹ 2,000
(ii)	₹ 5,000	=	₹ 5,000	+	₹ 10,000
(iii)	₹ 10,000	=	₹ 15,000	+	₹ 8,000

Total = Cash + Bank + Stock
Assets = 40,500 + 4,500 + 11,200 = ₹ 56,200
Liabilities = ₹ 11,200
Capital = ₹ 45,000