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Goods costing 10000 sold for 12000 on credit. What is the accounting equation?
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Goods costing 10000 sold for 12000 on credit. What is the accounting e...
ASSET SIDE---->>> 'Stock' less by 10,000 , 'Debtors' increase by 12000 LIABILITIES SIDE---->>> 'Capital' increase by 2000(exess amount 12,000-10,000)
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Goods costing 10000 sold for 12000 on credit. What is the accounting e...
Accounting Equation
The accounting equation is a fundamental principle of accounting that states that the assets of a business are equal to the liabilities and equity of the business. It can be represented as:
Assets = Liabilities + Equity
Application of Accounting Equation
In this case, the goods costing 10000 were sold for 12000 on credit. This transaction affects the accounting equation in the following ways:
- Assets: The sale of goods increases the assets of the business, specifically the accounts receivable account. The accounts receivable account represents the amount of money owed to the business by its customers. Therefore, the assets of the business increase by 12000.
- Equity: The sale of goods also increases the equity of the business. This is because revenue is recognized when goods are sold, which increases the net income of the business. Therefore, the equity of the business also increases by 12000.
- Liabilities: The sale of goods does not affect the liabilities of the business as no new debts were incurred. Therefore, the liabilities of the business remain the same.
Final Accounting Equation
After the sale of goods, the accounting equation can be represented as:
Assets = Liabilities + Equity
Assets = 0 + (10000 + 12000)
Assets = 22000
Therefore, the assets of the business are now 22000.
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Goods costing 10000 sold for 12000 on credit. What is the accounting equation?
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Goods costing 10000 sold for 12000 on credit. What is the accounting equation? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Goods costing 10000 sold for 12000 on credit. What is the accounting equation? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Goods costing 10000 sold for 12000 on credit. What is the accounting equation?.
Goods costing 10000 sold for 12000 on credit. What is the accounting equation? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Goods costing 10000 sold for 12000 on credit. What is the accounting equation? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Goods costing 10000 sold for 12000 on credit. What is the accounting equation?.
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