Analyse transactions of M/s Sahil & Co. for the month of March, 2020 on the basis of double entry system by
adopting the following approaches:
(A) Accounting Equation Approach.
(B) Traditional Approach.
Transactions for the month of March, 2020 were as follows
1. Sahil introduced capital through bank of ` 4,000.
2. Cash withdrawn from the City Bank ` 200.
3. Loan of ` 500 taken from Mr. Y.
4. Salaries paid for the month of March, 2020, ` 300 and ` 100 is still payable for the month of March, 2020.
5. Furniture purchased ` 500.
Required
What conclusions one can draw from the above analysis
SOLUTION
(A) Analysis of Business Transaction: Accounting Equation Approach
The accounting equation is
Assets = Liabilities + Capital
Conclusion:
It is evident from above analysis that procedure for analysis of transactions, classi cation of accounts and
rules for recording business transactions under accounting equation approach and traditional approach are
di erent. But the accounts a ected and entries in a ected accounts remain same under both approaches.
Thus, the recording of transactions in a ected accounts on the basis of double entry system is independent
of the method of analysis followed by a business enterprise. In other words, accounts to be debited and
credited to record the dual aspect remain same under both the approaches.