What is the accounting equation for purchase of fixed asset by using reserves? and pls explain how balancesheet get tally.
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Accounting equation
Replies (1)
1. While buying you have made the entry Machnery A/c Dr. Bank A/c Cr.
2. Since you want to buy this machinery out of reserves, that means in future these reserves cann't be used for dividend purposes, then pass another entry Reserves A/c Dr. Share Capital A/c Cr. (issue bonus shares to shareholders for that amount).
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