The accounting equation states that assets are equal to liabilities plus capital. Assets are resources owned by a business that are measured in monetary terms and increase with debits and decrease with credits. Liabilities are financial obligations that increase with credits and decrease with debits. Capital accounts relate to the owners' equity and increase with credits and decrease with debits. In every transaction, the total debits must equal the total credits.

1. Accounting Equation
Assets = Liabilities + Capital
By:- CA. MOHIT SHARMA

2. Accounting Rule:
•DEBIT the asset
what comes in
•CREDIT the asset
what goes out
Meaning
• Resources that the
business owns
• Measured in terms
of money
• Asset accounts increases
on the left or debit
• Decrease on the
right or credit side
Assets
In every transaction, the total Rs (money) value of all
debits equals the total Rs value of all credits
ASSETS
Debit Credit
+ -
BY:- CA. MOHIT SHARMA
8826980093/9650350688

3. Example:
• Creditors,
•Loans,
•Bank overdraft
•Outstanding-
Expense
Meaning
• Financial obligations
of an entity towards
outsiders
• Liabilities accounts
increases
on the right or credit side
• Decrease on the
left or debit side
Liabilities
In every transaction, the total Rs (money) value of all
debits equals the total Rs value of all credits
Liabilities
Debit Credit
- +
BY:- CA. MOHIT SHARMA
8826980093/9650350688

4. Example:
• Capital a/c
•Drawing a/c
Meaning
• These accounts relate
to owners of an
enterprise
• Equity accounts increases
on the right or credit side
• Decrease on the
left or debit side
Equity
In every transaction, the total Rs (money) value of all
debits equals the total Rs value of all credits
Liabilities
Debit Credit
- +
BY:- CA. MOHIT SHARMA
8826980093/9650350688