WHAT IS THE BASIC ACCOUNTING EQUATION?

Ans.: Accounting Equation:

Double entry system of accounting is universally accepted. Loca paciali innovated this system in the written form double entry system double aspects of each transaction are mentioned. Two accounts are influenced for each transaction one is debit and the other is credit Modern writers of Accounting have innovated an arithmetical equation known as accounting equation on the basis of this dual aspect of transactions. This equation is universally accepted. The basis of this equation is that the total assets of an organization are equal to the total equity i.e. asset equity.

This is a fundamental accounting equation.

Here,

A         =          E

A         =          Total Assets

E          =          Total equity.

There fore, the main accounting

Equation can be expressed in the Following extend Form

Here,

A         =          L + OE

L          =          Claim or right o creditors

OE       =          Owner’s equity.