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What what will be the accounting equation for received a check in full settlement of from Ram 2400 of 2000 and deposited into bank on same day?
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What what will be the accounting equation for received a check in full...
Understanding the Accounting Equation
The accounting equation is fundamental in accounting, representing the relationship between a company's assets, liabilities, and equity. It is expressed as:
Assets = Liabilities + Equity
When a check is received in full settlement from Ram, it impacts the accounting equation as follows:
Transaction Details
- Amount Due: ₹2000
- Amount Received: ₹2400
- Excess Amount: ₹400 (This may be considered as income or adjustment in accounts)
Impact on Assets
- Increase in Bank: When the check is deposited, the asset 'Bank' increases by ₹2400.
- Assets (Bank): +₹2400
Impact on Accounts Receivable
- Decrease in Accounts Receivable: The amount due from Ram (Accounts Receivable) decreases by ₹2000 since it is settled in full.
- Assets (Accounts Receivable): -₹2000
Impact on Income
- Excess Amount Handling: The excess amount of ₹400 can be recorded as income or a gain.
- Equity (Income): +₹400
Final Accounting Equation
Putting this all together in the accounting equation:
- Assets:
- (Bank: +₹2400) - (Accounts Receivable: -₹2000)
- Total Assets: ₹400 (Net Increase from Excess Amount)
- Liabilities: No change in liabilities.
- Equity: Increase by ₹400 due to excess amount.
Thus, the final accounting equation reflects:
Assets (₹400) = Liabilities (₹0) + Equity (₹400)
This transaction illustrates the flow of funds, showing how assets and equity change in response to financial activities.
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What what will be the accounting equation for received a check in full settlement of from Ram 2400 of 2000 and deposited into bank on same day?
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