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Write a brief note on accounting equation approach of recording transactions. |
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Answer» The relationship of assets with that of liabilities to outsiders and to owners in the equation form is known as accounting equation. Under the double entry system of book keeping, every transaction has two fold effect, which causes the changes in assets and liabilities or capital in such a way that an accounting equation is completed and equated. Capital + Liabilities = Assets Capital can also be called as owner’s equity and liabilities as outsider’s equity. |
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