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.
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.
??????
CAclubindia
