Accounting Equation

The accounting equation is the basis for the double-entry bookkeeping system. It represents the relationship between the assets, liabilities, and equity of a business.

Transactions

Sri Ram commenced business with 50,000.

Explanation

When Sri Ram commenced the business, he brought in capital of 50,000. This capital is the initial investment made by the owner into the business. It is classified as equity and represents the owner's claim on the assets of the business.

Accounting Equation

The accounting equation can be represented as follows:

Assets = Liabilities + Equity

The assets of the business are the resources owned by the business. In this case, since the business has just started, there are no assets yet.

The liabilities of the business are the obligations owed by the business to outsiders. Since the business has just started, there are no liabilities yet.

The equity of the business is the owner's claim on the assets of the business. In this case, the equity of the business is 50,000, which represents the initial investment made by the owner.

Therefore, the accounting equation can be represented as follows:

Assets = 0
Liabilities = 0
Equity = 50,000

Conclusion

In conclusion, when Sri Ram commenced business with 50,000, it was classified as equity and represented the owner's claim on the assets of the business. This initial investment is reflected in the accounting equation as an increase in equity. As the business grows and transactions are recorded, the accounting equation will change accordingly.