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Which one of the following can the accounting equation can be rewritten as?
A Assets + profit – drawings – liabilities = closing capital
B Assets – liabilities – drawings = opening capital + profit
C Assets – liabilities – opening capital + drawings = profit
D Assets – profit – drawings = closing capital – liabilitiesthe answer is C. am failing to find a way to get the right answer here, yet I know the accounting equations and business equation. for example, is B wrong because they deducted drawings, is D wrong because drawing were deducted, is A wrong because Drawing were deducted? please answer each of my questions. help me get the meaning.
I do not think you can possible have watched my free lectures on this!
Closing capital = opening capital + profit – drawings
Therefore:
Assets – liabilities = opening capital + profit – drawings
Subtract opening capital from both sides, and add drawings to both sides:
Assets – liabilities – opening capital + drawings = profit
am I correct sir?
is B wrong because they deducted drawings,
is D wrong because drawing were deducted,
is A wrong because Drawing were deducted?is this ok to analyse the situation like this? I watched the lecture sir, where you talked about “what the company owns and what it owed? chapter 2 dual entry?
B, D and A are wrong because none of them are arrived at by rearranging the original equation.
There is no quick way of dealing with this sort of question – you need to learning the accounting equation and be able to rearrange it quickly as necessary.My lecture on Chapter 2 of the free lecture notes are not on ‘dual entry’ – they are on the SOFP and SOPL (and it in this chapter that I explain the accounting equation).
The lectures on double entry booking are those covering Chapter 3 of the lecture notes (but are not relevant to the accounting equation).
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