Balance Sheet Equation Examples

Balance sheet equation is also called accounting equation. Balance sheet equation shows all the assets will always equal to owner's equity and outside liabilities. There is deep relationship of business's total assets and total liabilities. Total liabilities represents owner's equity and outside liabilities which are the sources of total asset's fund.

For knowing balance sheet equation, we take some examples which will helps you to understand balance sheet equation.

1st Example

Ajay started business with cash Rs. 330000, goods Rs. 200000 building Rs. 300000

Total Assets                                  =   Total outside Liabilities + Total Capital
Cash Goods Building	330000 200000 300000	Outside Liabilities Capital	Nil 830000
	830000		830000

2nd Example

Amount Withdrawn by him for personal use. Rs. 30000

Total Assets                                  =   Total Liabilities + Total Capital
Cash Goods Building	(330000-30000) 200000 300000	Outside  Liabilities Capital Less drawing	Nil 830000 -30000
	800000		880000

3rd Example

Depreciation charged on building Rs. 20000

Total Assets                                  =   Total Liabilities + Total Capital
Cash Goods Building	300000 200000 (300000-20000)	Outside Liabilities Capital Less depreciation loss	Nil 800000 - 20000
	780000		780000

4th Example

Fresh capital invested Rs. 60000

Total Assets                                  =   Total Liabilities + Total Capital
Cash Goods Building	(300000+60000) 200000 280000	Outside  Liabilities Capital New capital	Nil 780000 +60000
	840000		840000

5th Example

Purchased goods from Ritu Rs. 7000

Total Assets                                  =   Total Liabilities + Total Capital
Cash Goods Building	360000 (200000+7000) 280000	Capital Creditors	840000 7000
	847000		847000