Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = 

STARTING OF BUSINESS

Business started is also known as business began and business commenced.

There are different types of business; sole proprietor, partnership, private limited company and public limited company.

When a businessperson starts his business, he must invest cash.

Sometimes he starts business with cash, stock (business goods) and fixed assets.

PROBLEM: 1

The extracted information is given below:

Business started by Aman with cash ₹/Rs 150,000 and stock ₹/Rs 35,000.

Required: Accounting equation

 [Answer: Assets = Rs 185,000; Capital = Rs 185,000]

SOLUTION:

Explanation:      

While starting the business, cash (asset) comes into the business,

Cash increases asset by 1,50,000; it is represented under assets column,

Stock also increases assets by 35,000; it is represented under assets column,

Starting business also increases the capital by 1,85,000; it is the total of cash and stock. It is represented under capital column,

There is no effect on liabilities column.

It can be represented as under:   

                                                          Effect on Accounting Equation

Alternatively,

                                                                   Accounting Equation

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Basic Problem: 1

The following extracted information is given to you:

       Business started with cash Rs 150,000; stock Rs 80,000 and equipment Rs 40,000.

Required: Show in accounting equation

[Answer: Assets = Rs 270,000; Capital = Rs 270,000; Liabilities = Nil]

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