POSSIBLE COMBINATIONS OF

CHANGES IN ACCOUNTING
EQUATION:
Instacare Pvt. Ltd.
 Increase in Assets ; Increase in Owner’s
Equity.
■ Forming a medical devices company in partnership between two people called Instacare Pvt. Ltd.
On April 1, 2019, Both Owners invested personal funds of 2,50,000 each to start IPL. The effect
of this transaction on IPL's accounting equation is:

Assets = Liability + Owner’s equity

+Rs. 5,00,000 = No effect + Rs. 5,00,000

■ This transaction is recorded in the asset account Cash and the owner's equity account.
Increase in assets ; Increase in Liability

■ On june 10, 2019 IPL obtains Rs. 10,00,000 by borrowing money from its bank. The effect of this
transaction on the accounting equation is:

■ Assets = Liability + Owner’s Equity

+Rs. 10,00,000 = + Rs. 10,00,000 + No effect

■ This transaction is recorded in the asset account cash and the liability accounts loan.
 Increase in one asset; decrease in another
asset.
■ On July 20, 2019 Instacare Pvt. Ltd. spends Rs. 2,50,000 of cash to purchase Machinery for use in
the business. The effect of this transaction on the accounting equation is:

■ Assets = Liability + Owner’s equity

+Rs. 250000 = No Effect + No Effect
- Rs. 250000

■ This transaction is recorded in the asset accounts Equipment and Cash. Equipment increases by
Rs.2,50,000, and Cash decreases by Rs. 2,50,000. 
Increase in assets ; Increase in Liability

■ On 25, July2019, The company purchased Raw material on 30 day credit

worth 6,00,000.

Assets = Liability + Owner’s Equity

+Rs. 6,00,000 = + Rs. 6,00,000 + No effect

■ This transaction is recorded in assets accounts and creditors in liability

account.
Decrease in asset; decrease in owners' equity.

■ On November 2, 2019 Owner withdraws Rs. 50,000 of cash from the business for his personal
use. The effect of this transaction on IPL's accounting equation is:

■ Assets = Liabilities + Owner’s Equity

- Rs.50,000 = No Effect + - Rs. 50,000

■ This transaction is recorded in the asset account and the owner's equity account.
Decrease in asset; decrease in owners'
equity. (5.b)
■ Company paid salary to worker of Rs. 40,000 in cash the effect of this transaction
would be –

■ Assets = Liabilities + Owner’s equity

Rs.-40,000 = -- + -Rs.40,000

This transaction is recorded in cash account as assets and this expense will decrease the
owner’s equity.
Increase in one asset; decrease in another
asset.
■ On august 20, 2019 The Instamed care pvt. Ltd. Bought shares of Hinduja brothers
worth 1,00,000

■ Assets = Liabilities + Owner’s equity

+Rs. 1,00,000
-Rs. 1,00,000

■ This transaction is recorded in investment as an assets and bank account as an liability.

 Increase in assets; Increase in owner’s
equity
■ On 15 august 2019, Interest of RS. 5,000 is received on debts.

■ Assets = Liability + owner’s equity

+ Rs. 5000 = ---- + +Rs. 5,000

This transaction is recorded in Bank balance account in assets and all the income indirectly increase
the owner’s equity
Increase in liability ; Decrease in owner’s
equity
■ The rent of 20,000 the factory for the month is not paid yet.

■ Assets = liability + owner’s equity

---- = + Rs 20,000 + - Rs. 20,000
■ This transaction is recorded in outstanding rent account in liability and this expense will
decrease the equity of owner
 Increase in Liabilities; Decrease in Owners Equity.

■ On December 21, 2019 IPL uses a temporary help service for 6 hours at a cost of Rs. 500 per hour. IPL will
pay the invoice when it is due in 10 days. The effect on its accounting equation is:

■ Assets = Liabilities + Owner’s Equity

■ No effect = + Rs. 30,000 + - Rs. 30,000

■ IPL's liabilities increase by Rs. 30,000 and the expense causes owner's equity to decrease by Rs. 30,000.
■ The liability will be recorded in Accounts Payable and the expense will be reported in Temp Service
Expense.
Increase in one liability; decrease in another liability.

■ The company issued Bills Payable to Creditors of RS. 50,000.

 
Assets = Liabilities + equity
---- = + Rs. 50,000 + ----
-Rs. 50,000
 
This transaction will be recorded in account as bill payable in liability.
Decrease in assets ; decrease in Liabilities.

 
The loan payment of Rs. 70,000 is paid through bank balance

Assets = liabilities + equity

-RS. 70,000 = - Rs. 70,000 + ----

This transaction is recoded as loan repayment in assets and liabilities as amount paid.
Increase in one asset; decrease in another
asset. (1.b)
■ On December 28, 2019 IPL receives Rs. 32,000 from the sale of goods in cash. The collection of
accounts receivables has this effect on the accounting equation:

■ Assets = Liabilities + Owner’s Equity

■ +32,000 = No Effect + No Effect
-32,000
■ The company's asset (cash) increases and another asset (accounts receivable) decreases.
Increase in liability; decrease in liability

■ The company took a loan of Rs. 1,00,000 to pay back the previous one.
■ Assets = Liability + owner equity
■ ------ = + Rs.1,00,000 + ----
■ - Rs.1,00,000
■ This transaction is recorded in Loan account and loan payable account in liability .
Decrease in assets ; decrease in
Liabilities
■ The loan payment of Rs. 50,000 is paid through bank balance.

■ Assets = liabilities + equity

■ -RS. 50,000 = - Rs. 50,000
■ This transaction is recoded as loan repayment in assets and liabilities as amount paid.