Accounting Equation:

Assets = Liabilities + Owner's Equity

Transaction Analysis:

1. Starting business with cash ₹75000 and ₹25000.
- Increase in cash by ₹75000 and ₹25000
- Increase in Owner's Equity by ₹100000

2. Paid rent ₹2000.
- Decrease in cash by ₹2000

3. Bought goods for cash ₹30000 and credit for ₹44000.
- Increase in inventory by ₹74000
- Increase in accounts payable by ₹44000
- Decrease in cash by ₹30000

4. Goods costing ₹50000 sold at a profit of 25% out of which ₹27500 received in cash.
- Increase in cash by ₹27500
- Increase in owner's equity by ₹18750 (25% of ₹50000)

5. Purchased a motorcycle for personal use ₹27500.
- Decrease in cash by ₹27500

Final Accounting Equation:

Assets = Liabilities + Owner's Equity
Inventory + Cash = Accounts Payable + Owner's Equity
₹74000 + ₹44800 = ₹44000 + ₹84800

Explanation:

The accounting equation is a fundamental principle of accounting that represents the relationship between a company's assets, liabilities, and owner's equity. In this case, we are analyzing various transactions that have occurred during a business operation.

Initially, the business started with a cash balance of ₹75000 and ₹25000, which increased the owner's equity by ₹100000. Then, the business paid rent of ₹2000, which decreased the cash balance by the same amount.

The business then purchased goods for cash worth ₹30000 and on credit worth ₹44000. This increased the inventory balance by ₹74000 and also increased the accounts payable by ₹44000.

After that, the business sold goods costing ₹50000 at a profit of 25%, out of which ₹27500 was received in cash. This increased the cash balance by ₹27500 and also increased the owner's equity by ₹18750, which is 25% of the cost of goods sold.

Finally, the owner purchased a motorcycle for personal use, which decreased the cash balance by ₹27500.

By applying the accounting equation, we can see that the assets equal the sum of liabilities and owner's equity. The inventory and cash balances are the assets, and the accounts payable and owner's equity represent the liabilities and owner's investment in the business, respectively.

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