Table of Contents


Accounting Equation signifies that the assets of a business are always equal to the total of capital and liabilities. A business transaction will result in the change in either of the assets, liabilities or capital of the firm and even after the change the assets will be again equal to the total of capital and liabilities. If a business transactions results in the increase of assets, there will also be a corresponding increase in the amount of either capital or liabilities by the same amount.

The ‘Dual Aspect Concept’ is the basis of accounting equation. It can be expressed as:


An asset is any owned physical object or right, having a money value. These are the economic resources which are owned by a business and from which future economic benefits are expected to flow to the enterprise. The assets may be tangible or intangible like Land and Building, Plant and Machinery, Furniture, Goodwill, Patents, Trademarks and Copyrights etc.

Equities refer to all claims or rights against the assets of an enterprise. These show the sources of the assets. The claims against the assets may be external or internal. External claims are outsiders’ equity and internal claims are owner’s equity. Outsider’s Equity is the liability of the business and owner’s equity is the capital of the business.

The capital is the amount invested by the owner in the business enterprise. It may be invested in cash or kind.

The Liabilities refer to an amount owing by one person to another payable in money, goods or services. The Liabilities may be Long term Liabilities (payable within more than a year) or Short term Liabilities (payable within a year).

The Accounting Equation can be expressed as follows:






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AccountingNon profit organisationDepreciationLiquidity ratios
Nature of AccountingReceipts and Payments AccountDepreciation AccountingAcid Test Ratio
Benefits of AccountingScope of accountingHire Purchase AccountingCash Ratio
Difference between cost accounting and financial accountingFinancial accounting, cost accounting and management accountingDifference between hire purchase and instalment systemFinancial ratio analysis
Difference between transaction and eventTransactionsUsers of AccountingRatio analysis
Limitation of AccountingCapital ExpenditureInstalment SystemDifference between consignment and sale
Book KeepingRevenue ExpenditureReserves AccountingAbnormal loss vs normal loss in consignment
AccountancyDifference between capital and revenue expenditureProvisions Treatment of loss on consignment
Accounting as science or an artAccounting EquationSingle entry systemAccounting treatment of consignment
Book Keeping vs accountingDeferred Revenue ExpenditureDifference between statement of affairs and balance sheetJoint venture vs consignment
Book keeping vs accountancyCapital receiptIFRSDepartmental Accounting
Accounting vs accountancyRevenue receiptBalance SheetMethods of departmental accounting
Basis of AccountingDifference between capital and revenue receiptProfit and loss AccountAllocation of expenses in departmental accounting
Branches of accountingDifference between accounting concepts and conventionsTrading AccountInter-departmental transfers
Cash and mercantile system of accountingAccounting StandardsVoyage AccountDifferent types of branches
Accounting PrinciplesObjectives of AccountingAccounting for Incomplete VoyageDepartmental vs Branch accounting
Golden rules of accountingProcess of AccountingJoint ventureMethods of branch accounting
Double entry system of book keepingScope of AccountingJoint Venture Vs PartnershipIncorporation of branch trial balance
Double entry vs Single entry systemAccounting Concepts vs Accounting conventionsMethods of recording transactions in Joint VentureGarner VS Murray Rule
History of AccountingDifference between provisions and reservesConsignment

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