Balance Sheet Equation: Jaiib/DBF Paper 2 (Module C) Unit 1

Balance Sheet Equation: Jaiib/DBF Paper 2 (Module C) Unit 1

Dear bankers,

As we all know that  is Balance Sheet Equation for JAIIB Exam. JAIIB exam conducted twice in a year. So, here we are providing the Balance Sheet Equation (Unit-1), Final Accounts (Module C), Accounting Finance for Bankers-Paper 2.

♦Balance Sheet Equation

An Accounting Equation is also called the Balance Sheet Equation. We all know that we record all the business transactions using the Dual Aspect concept. This means that each debit has an equal credit and vice-versa.

  • Capital: It means the amount which the owner of business has invested in the firm and can claim from the firm.
  • Liability: It means the amount which the firm owes to outsiders. Long term liabilities are those liabilities which are payable after a long term. Current liabilities are those liabilities which are payable in near future (generally within one year).
  • Asset: Assets are things of value owned. Fixed assets are those assets which are purchased for the purpose of operating the business but not for resale, e.g. Land, building, Plant and Machinery, etc. Current assets are those assets which are kept for short term for converting into cash or for resale, e.g, unsold goods, debtors, cash, bank balance, etc.

Assets = Liabilities + Capital (Owner’s Equity)

Liabilities = Assets- Capital or Capital = Assets – Liabilities

Example:

ABC starts the food truck. He puts ₹ 50,000 as a capital fund. He further loans ₹ 25,000 from a local credit vendor. Now, he has a total of ₹ 75,000, he then purchases a fully furnished truck for ₹ 45,000.

Below is the ABC balance sheet for December 2017.

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