Proving the Accounting Equation (A = C + L) - Class 11

Introduction:
The accounting equation is the foundation of the double-entry accounting system. It states that assets are equal to liabilities plus owner's equity. In this question, we will prove the accounting equation using different transactions.

Heading 1: Commenced business with cash of Rs. 100,000

- Cash (Asset) increases by Rs. 100,000
- Capital (Owner's Equity) also increases by Rs. 100,000

A = 100,000
C + L = 0 + 100,000 = 100,000
Therefore, A = C + L

Heading 2: Purchased TV for personal use for Rs. 12,000

- There is no change in the business assets or liabilities
- The owner's equity decreases by Rs. 12,000 (since it is a personal expense)

A = 100,000
C + L = 0 + 88,000 = 88,000
Therefore, A = C + L

Heading 3: Purchased laptop for office use costing Rs. 25,000

- Cash (Asset) decreases by Rs. 25,000
- Office Equipment (Asset) increases by Rs. 25,000

A = 100,000 + 25,000 = 125,000
C + L = 0 + 88,000 = 88,000
Therefore, A = C + L

Heading 4: Purchased goods for cash Rs. 30,000

- Cash (Asset) decreases by Rs. 30,000
- Inventory (Asset) increases by Rs. 30,000

A = 125,000 + 30,000 = 155,000
C + L = 0 + 88,000 = 88,000
Therefore, A = C + L

Heading 5: Sold goods (cost of Rs. 10,000) for Rs. 12,000

- Cash (Asset) increases by Rs. 12,000
- Cost of Goods Sold (Expense) increases by Rs. 10,000
- Inventory (Asset) decreases by Rs. 10,000
- Gross Profit (Revenue - Cost of Goods Sold) increases by Rs. 2,000

A = 155,000 + 12,000 - 10,000 = 157,000
C + L = 0 + 88,000 = 88,000
Therefore, A = C + L

Heading 6: Purchased goods on credit for Rs. 20,000

- Accounts Payable (Liability) increases by Rs. 20,000
- Inventory (Asset) increases by Rs. 20,000

A = 157,000 + 20,000 = 177,000
C + L = 0 + 108,000 = 108,000
Therefore, A = C + L

Conclusion:
From the above transactions, we can see that the accounting equation (A = C + L) holds true at every step. It is important to note that every transaction affects at least two accounts and the accounting equation must always remain in balance.