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It derives multiple forms of the basic accounting equation and shows how profit or loss is calculated using income minus expenses and changes in capital. The unit includes several exercises that classify information into current/non-current assets and liabilities, compute capital balances, and determine the impact of transactions on the accounting equation across January and March 2016 examples, including income statement preparation.",{"@graph":69,"@context":121},[70,84,104],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":20,"@type":76,"position":81},"https://docshare.wps.com/document/exam/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/accounting-equation-double-entry-system-accounting-concepts-unit-02-accounting-equation-double-entry-system-accounting-concepts/648306/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":98,"encodingFormat":97,"isAccessibleForFree":99,"interactionStatistic":100},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/accounting-equation-double-entry-system-accounting-concepts-unit-02-accounting-equation-double-entry-system-accounting-concepts/648306.png","ImageObject",300,407,{"name":92,"@type":93},"McGucket","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-10-23",true,{"@type":101,"interactionType":102,"userInteractionCount":4},"InteractionCounter",{"@type":103},"ViewAction",{"@type":105,"mainEntity":106},"FAQPage",[107,113,117],{"name":108,"@type":109,"acceptedAnswer":110},"What is the entity concept in accounting?","Question",{"text":111,"@type":112},"The business is treated as separate from the owners, so transactions are recorded from the firm’s perspective rather than the owner’s. Capital is treated as a liability and drawings as an asset.","Answer",{"name":114,"@type":109,"acceptedAnswer":115},"How is the basic accounting equation derived and used in double entry accounting?",{"text":116,"@type":112},"The accounting equation illustrates what a business owns versus what it owes, and the double entry system is based on it. The unit provides multiple derived forms, linking assets, capital, profit, income, expenses, and liabilities.",{"name":118,"@type":109,"acceptedAnswer":119},"How do you calculate profit or loss using the given concepts?",{"text":120,"@type":112},"Profit or loss can be calculated as income minus expenses. It can also be computed using changes in capital plus the effect of drawings and additional capital introduced.","https://schema.org",{"og:url":83,"og:type":123,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":125,"canonical":83},"index,follow",{"doc_id":127,"site_id":62},648306,1792793044,{"code":4,"msg":5,"data":130},{"doc_id":127,"user_id":131,"nickname":92,"user_avatar":132,"doc_module":4,"category_id":19,"category_name":20,"doc_title":65,"doc_description":67,"doc_content":133,"file_id":134,"file_url":135,"file_type":136,"file_size":137,"view_count":4,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":138,"language":139,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":140,"faqs":141,"seo_title":142,"seo_description":67,"update_tm":128,"read_time":143},1236954412713,"https://us-avatar.wpscdn.com/davatar_29158cc5080c5b710cf443261637dec0","Accounting Equation,Double Entry System &Accounting Concepts  \nAAT LevellFAC-Financial Accounting  \nNuwan KalupahanaBBA.(Finance)Sp.(UOC),CA Finalist  \n6C5Gaó aedaa6咖oasddna)5 Estd.JAYASEKERA MANAGEMENT CENTRE (PVT)LTD  \n## UNIT 02-AcCOUNTING EQUATION,DOUBLE ENTRY SYSTEM &ACCOUNTING CONCEPTS\n\n\n|  | Accounting Equation,Double Entry System and Accounting Concepts,(25%)   |  |\n| --- | --- | --- |\n| 02   | 21   | Entity concept   |\n|  | 22   | Elementsof Accounting (including,Assets,Liabilities,income,Expenses and Equity)   |\n|  | 23   | Recording Business Transactions in line with Accounting Equation   |\n|  | 24   | Dual aspect ofatransaction   |\n|  | 25   | Doublo Entry System   |\n|  | 26   | Other Accounting Concepts(Coing conce,Periodic,Historical Cost,Money Measurement,  \u003Cbr>Matching.Accrual,Prudence,Consistency,Realization,Materiality,Substance over-form)   |\n\n### 1.   ENTITY CONCEPT\n\n·    The business is treated separate from the owners.  \n·     Hence transactions are recorded from the point of view of the firm and notthe owner.  \n·    Hence capital is a liability and drawings is an asset.  \n### 2.   ELEMENTS OF ACCOUNTING\n\nAssets  \nLiabilities  \nEquity  \nIncome  \nExpenses  \n### 3.   AcCOUNTING EQUATION\n\nAccounting equation is a simple way to illustrate two facts about a business,which is what a business owns and what it owes.  \nEntire double entry accounting concept is based on the basic accountingequation.  \n·   DERIVING THE BASIC ACCOUNTING EQUATION  \no Assets =Capital  \no Assets =Capital+Liabilities  \no Assets =Capital+Profit+Liabilities  \no Assets =Capital+(Income-Expenses)+Liabilities  \no Assets +Expenses =Capital+Income+Liabilities  \no NCA+CA+Expenses =Capital+Income+NCL+CL  \no Stock+Debtors+Cash +Expenses =Capital+Income+Bank Loan +Creditors  \n### 4.  CALCULATION OF PROFIT/Loss\n\no Profit/Loss=Income-Expenses  \no Profit/Loss =(Closing Capital-Opening Capital)+Drawings-Additional Capital  \n### 01.  EXERCISE\n\nThe below information given for an organization.  \nRs.  \n1.Motor vehicle300,000    99.Bank balance50,000  \n2.Machinery200,000    10.Land &building400,000  \n3.Inventory50,000    11.Cash in hand60,000  \n4.Debtors/Trade receivables80,000    12.Prepaid telephone3,000  \n5.Creditors/Trade payables50,000    13.Office equipment12,000  \n6.Accrued electricity10,000    14.Mortgage loan15,000  \n7.Advance rent received5,00015.Interest income receivable7,000  \n8.Bank loan100,00016.Tax payable11,000  \n·Distinguish the above information using,  \na)Non-current assetsc)Non-current liabilities  \nb)   Current assetsd)Current liabilities  \n● Calculate the capital balance  \n### 02.  EXERCISE\n\nBelow transactions are given for Mahinda's business for the month of January 2016.Show the impact on the accounting equation.  \n\n| Date   | Transaction   | Amount   |\n| --- | --- | --- |\n| 2/1   | Mahinda invested cash   | 100,000   |\n| 3/1   | Purchased amotor vehicle   | 45,000   |\n| 4/1   | Cash purchases   | 30,000   |\n| 5/1   | Cash sales   | 48,000   |\n| 6/1   | Obtained a bank loan   | 60,000   |\n| 7/1   | Repayment of bank loan   | 32,000   |\n| 8/1   | Mahinda's drawings   | 50,000   |\n| 9/1   | Interest income received   | 48,000   |\n| 10/1   | Electricity expenses paid   | 16,000   |\n\n### 03.  EXERCISE\n\nBELOW TRANSACTIONS ARE GIVEN FOR CHAMARI's BUSINESS FOR THE MONTH OFMARCH 2016.  \nShow the impact on the accounting equation.  \n\n| 9/3   | Discounts allowed   | 20,000   |\n| --- | --- | --- |\n| 10/3   | Discounts received   | 30,000   |\n| 11/3   | Obtained a bank loan   | 400,000   |\n| 12/3   | Owners drawings   | 80,000   |\n| 13/3   | Paid Bank loan   | 200,000   |\n| 14/3   | Received from debtors   | 150,000   |\n| 15/3   | Paid to creditors   | 130,000   |\n| 16/3   | Electricity paid   | 32,000   |\n\n\n| Date   | Transaction   | Amount   |\n| --- | --- | --- |\n| 2/3   | Invested Capital   | 500,000   |\n| 3/3   | Cash purchases   | 300,000   |\n| 4/3   | Credit purchases   | 700,000   |\n| 5/3   | Cash sales   | 500,000   |\n| 6/3   | Credit s","cbCairWhliAZIxvM","https://ap.wps.com/l/cbCairWhliAZIxvM","pdf",4567820,32,"English","# Entity Concept\n# Elements of Accounting\n# Accounting Equation\n## Deriving the Basic Accounting Equation\n# Calculation of Profit/Loss\n# Exercises\n## Exercise 01\n## Exercise 02\n## Exercise 03\n## Exercise 04\n## Exercise 05\n# Past Papers: Accounting Equation and Profit Equation","[{\"question\":\"What is the entity concept in accounting?\",\"answer\":\"The business is treated as separate from the owners, so transactions are recorded from the firm’s perspective rather than the owner’s. Capital is treated as a liability and drawings as an asset.\"},{\"question\":\"How is the basic accounting equation derived and used in double entry accounting?\",\"answer\":\"The accounting equation illustrates what a business owns versus what it owes, and the double entry system is based on it. The unit provides multiple derived forms, linking assets, capital, profit, income, expenses, and liabilities.\"},{\"question\":\"How do you calculate profit or loss using the given concepts?\",\"answer\":\"Profit or loss can be calculated as income minus expenses. It can also be computed using changes in capital plus the effect of drawings and additional capital introduced.\"}]","Accounting Equation, Double Entry System & Accounting Concepts - Unit 02 - Accounting Equation, Double Entry System & Accounting Concepts | PDF",81]