Simple accounting equcation

Accounting Entries 839 views 2 replies

1.Purchase an office building for RS.1,35,000 paying RS.45000 as cash and the balance through  a loan .

2.Office building expenses paid in cash  RS.2,700

IN first  CAPITAL + LIABLITIES = ASSEST

                   0          +90000           =90000(135000-45000)( 45000-cash+building)

IN 2nd what will happen.

Replies (2)

1st is also worng in 1st if Rs.40000 cash brougt in by proprietor then 45,000+90,000=1,35,000 any way cash increased and then paid in second if the expenses bron by proprietor 47,700+90,000=1,37,200(expenses capitalised) same case as above

if the expenses are revenue

47,700+90,000-2,700(it will come from p&l as u show in expenses)=1,35,000

Thank for replay

I don't know 2700 is capital or revenue.

Office building purchased on 1.4.2008

Office building expenses paid on 31.3.2009

In first case I had equalized the equation

but In second case, the book answer is

 CAPITAL + LIABLITIES = ASSEST

  5400     +2700             = 2700
 

If the expense is capital nature it increase asset value.

if the expense is revenue nature it will increase the expense.

Here, asset value is increased and also liablities but the transaction made through cash.

??????

 


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