Introduction

The accounting equation is a fundamental principle in accounting that states that assets must always equal liabilities plus equity. It provides a framework for recording and analyzing financial transactions. In this case, we will analyze the impact of three transactions on the accounting equation.

Transaction 1: Started business with cash 2,00,000

When a business is started with cash, it increases both the assets and the equity of the business. Cash is an asset, and the owner's investment represents an increase in equity. Therefore, the accounting equation will be affected as follows:

Assets (+) 2,00,000
Equity (+) 2,00,000

Transaction 2: Purchased furniture 25,000

When furniture is purchased, it increases the assets of the business. Furniture is considered a fixed asset and is recorded on the balance sheet. However, since the purchase is made using cash, it does not affect the equity. Therefore, the accounting equation will be affected as follows:

Assets (+) 25,000
Equity (no change)

Transaction 3: Purchased goods on credit 60,000

When goods are purchased on credit, it increases the assets of the business and creates a liability. The goods purchased will be recorded as inventory, which is an asset. The liability is created because the business now owes the supplier for the goods purchased. Therefore, the accounting equation will be affected as follows:

Assets (+) 60,000
Liabilities (+) 60,000
Equity (no change)

Summary

The three transactions described above have the following impact on the accounting equation:

Assets: +2,00,000 + 25,000 + 60,000 = 2,85,000
Liabilities: +60,000
Equity: +2,00,000

Therefore, the total of the accounting equation after these transactions will be:

Assets = 2,85,000
Liabilities = 60,000
Equity = 2,00,000

Conclusion

The accounting equation provides a snapshot of a business's financial position by showing how assets, liabilities, and equity are related. By analyzing the impact of each transaction on the accounting equation, we can accurately record and understand the financial transactions of a business.

D is answer