Accounting Equation

Dr. Reena Agrawal

Assistant Professor-Accounting,
Finance, Entrepreneurship, Design Thinking
 Accounting Equation

According to the Double Entry Concept there should be a

debit for every credit and a credit for every debit.
Claims = Economic Resource
Capital (+) Liabilities = Assets

[Capital + Revenues-Expenses-Drawings-
Dividends] + Liabilities = Assets
Q1. Show the working of the double entry system in the form
of accounting equation.
 1) Rakesh Sinha starts a ‘Home Depot’ in with cash of Rs 10,00,000.
 2) He purchase furniture of Rs 2,50,000 ,from Godrej Furniture ltd on
credit basis.
 3) Rakesh Sinha purchased goods worth Rs 2,00,000 for cash.
 4) He sold goods worth Rs 1,00,000 for Rs 2,00,000 . 40% of sales was
done on credit basis to Novotel Hotel and rest was on cash basis.
 5) 3/5th of the dues were paid off to Godrej Furniture ltd.
 6) Rakesh Sinha took Rs 50,000 from his business to purchase a bike
for his son.
 7) He paid wages Rs 20,000 to four of his employees.
 8) He opened a current account in PNB and deposited Rs 5 lakh in that
account.
 9) Receives the dues from Novotel Hotels in cheque.
 1) Rakesh Sinha starts a ‘Home Depot’ in with cash
of Rs 10,00,000.

 Capital Rs 10 lakh

 Cash Rs 10 lakh
 2) He purchase furniture of Rs 2,50,000 ,from
Godrej Furniture ltd on credit basis.

 Furniture Rs 2,50,000

 Godrej Furniture's Ltd Rs 2,50000

 3) Rakesh Sinha purchased goods worth Rs
2,00,000 for cash.

 Goods Rs 2,00,000

 Cash Rs 2,00,000
 4) He sold goods worth Rs 1,00,000 for Rs
2,00,000 . 40% of sales was done on credit basis
to Novotel Hotel and rest was on cash basis.

 Goods Rs 1,00,000

 Profit =Sales Rs 2,00,000- Cost Rs 1,00,000

 Sales:

 Novotel Rs 80,000
 Cash Rs 1,20,000
 5) 3/5th of the dues were paid off to Godrej
Furniture ltd.

 Cash Rs 1,50,000

 Godrej Furniture's Ltd Rs 1,50000

 6) Rakesh Sinha took Rs 50,000 from his
business to purchase a bike for his son.

 Drawing Rs 50,000

 Cash Rs 50,000
 7) He paid wages Rs 20,000 to four of his
employees.

 Wages Rs 20,000

 Cash Rs 20,000
 8) He opened a current account in PNB and
deposited Rs 5 lakh in that account.

 PNB Rs 5,00,000

 Cash Rs 5,00,000
 9) Receives the dues from Novotel Hotels in
cheque.

 Novotel Rs 80,000

 PNB Rs 80,000

 Accounting Equation-2020.xlsx
Exercise

 Increase an asset and increase a liability

 Increase an asset and decrease another asset

 Increase an asset and increase equity

 Decrease an asset and decrease a liability

 Decrease an asset and decrease equity

Thank You