Introduction:
The accounting equation is a fundamental concept in accounting that represents the relationship between a company's assets, liabilities, and owner's equity. It can be expressed as: Assets = Liabilities + Owner's Equity. The equation shows that a company's assets are financed by either debt (liabilities) or the owner's investment (owner's equity). In this case, we will apply the accounting equation to analyze the financial position of Salem business, which started with a cash balance of $250,000.

Assets:
Assets are resources owned by a company that have economic value. In the case of Salem business, the initial cash balance of $250,000 represents its primary asset. Cash is a liquid asset that can be readily used for transactions and to meet financial obligations. It is recorded on the balance sheet as a current asset.

Liabilities:
Liabilities are obligations or debts owed by a company to external parties. At the start of the business, there is no information provided regarding any liabilities incurred by Salem business. Therefore, the liability component of the accounting equation is currently zero.

Owner's Equity:
Owner's equity represents the residual interest in the assets of a company after deducting liabilities. It is the owner's claim on the company's assets. Since Salem business is just starting, there is no information provided regarding any investments or withdrawals made by the owner. Therefore, the owner's equity component of the accounting equation is currently zero.

Accounting Equation:
Using the accounting equation, we can summarize the financial position of Salem business as follows:
- Assets = Liabilities + Owner's Equity
- Assets = $250,000 + $0
- Assets = $250,000

Conclusion:
The accounting equation highlights that Salem business has $250,000 as its sole asset, represented by the cash balance. As the business progresses, additional transactions will occur, affecting both the asset and equity sides of the equation. By maintaining the balance of the accounting equation, companies can ensure accurate financial reporting and analysis.

Cash A/c dr.....250000
to capital A/c 250000