Q.Show the effect of the following transactions on the Accounting Equation of Mr. Anil:

This is the standard way MSBSHSE tests whether a student can actually trace a series of transactions through the Accounting Equation, not just recite it.

Each transaction is applied to the running Cash, Stock, Furniture, Creditors and Capital figures. Cash starts at ₹1,00,000, falls to ₹70,000 after buying goods, and finally to ₹63,000 after paying rent and the creditor; Stock stands at ₹30,000; Furniture at ₹10,000; Creditors fall from ₹10,000 to ₹5,000; Capital falls from ₹1,00,000 to ₹98,000 after the rent expense.

The Accounting Equation is traced transaction by transaction in the table below.

Explanation of each step: (i) cash and capital both rise by ₹1,00,000 — the owner's introduction of capital. (ii) cash falls and stock rises by ₹30,000 — one asset is converted into another, capital is unaffected. (iii) furniture and creditors both rise by ₹10,000 — an asset acquired on credit. (iv) rent is an expense, so cash falls by ₹2,000 and Capital falls by the same amount, since an expense ultimately reduces the owner's claim. (v) paying the creditor reduces both cash and creditors by ₹5,000 — a liability is settled using an asset, capital is unaffected.

Final check: Assets = Cash ₹63,000 + Stock ₹30,000 + Furniture ₹10,000 = ₹1,03,000. Liabilities + Capital = Creditors ₹5,000 + Capital ₹98,000 = ₹1,03,000. Both sides agree, confirming the equation holds after all five transactions.

Build a running table with one column per asset/liability/capital item and one row per transaction; after each transaction, re-total both sides and confirm they still agree before moving to the next transaction — this catches an arithmetic slip immediately rather than only at the very end.

Students often forget that paying an EXPENSE (like rent) reduces Capital, not just Cash — only treating it as a fall in Cash leaves the equation out of balance. Remember: an expense is ultimately borne by the owner, so it reduces Capital exactly as Drawings would.