Journal Entry of Purchase Return:

When a company returns goods to its supplier, a purchase return occurs. This may happen due to various reasons such as damaged goods, incorrect quantity or quality, or simply because the company no longer requires the items. In such cases, the company needs to record the transaction in its books of accounts through a journal entry.

1. Identify the accounts involved:
- Purchase Return: This is a contra account to the purchases account and is used to record the value of goods returned to the supplier.
- Accounts Payable: This account is used to record the amount owed to the supplier for the returned goods.

2. Determine the amounts:
- Purchase Return: Determine the value of the goods being returned and record it as a debit in the purchase return account.
- Accounts Payable: Reduce the amount owed to the supplier by crediting the accounts payable account.

3. Record the journal entry:
The journal entry for a purchase return is as follows:

[Date] Purchase Return Account Debit
Accounts Payable Account Credit

For example, if a company returns goods worth $500 to its supplier, the journal entry would be:

[Date] Purchase Return Account $500
Accounts Payable Account $500

Accounting Equation:

The accounting equation is the foundation of double-entry bookkeeping and is represented as:

Assets = Liabilities + Equity

- Assets: These are the economic resources owned by a company, including cash, inventory, property, and equipment. Assets are usually classified into current and non-current assets.
- Liabilities: These represent the company's obligations or debts to external parties, such as suppliers, lenders, or creditors. Liabilities may include accounts payable, loans, or accrued expenses.
- Equity: Also known as shareholders' equity or net assets, equity represents the residual interest in the company's assets after deducting liabilities. It is the ownership interest of the shareholders.

The accounting equation must always remain in balance. Every transaction affects at least two accounts and maintains the equation's balance. For example, when a company purchases inventory on credit, it increases its assets (inventory) and liabilities (accounts payable) simultaneously, ensuring that the equation remains balanced.

In summary, the accounting equation serves as a fundamental concept in accounting, providing a framework for recording and analyzing financial transactions. It highlights the relationship between a company's assets, liabilities, and equity and serves as a basis for preparing financial statements and assessing the financial position of a business.