The situation
The shop starts with ₹8 lakh cash, ₹12 lakh equipment and ₹7 lakh debt. It repays ₹3 lakh debt from cash, then buys ₹2 lakh inventory for cash.
Your task
What are closing assets, liabilities and equity?
Reveal step-by-step solution
Set up the problem
Opening equity is ₹8 + ₹12 − ₹7 = ₹13 lakh. Repaying principal lowers both cash and debt.
Work through the numbers
Closing cash = ₹8 − ₹3 − ₹2 = ₹3 lakh. Assets = ₹3 + ₹12 + ₹2 = ₹17 lakh. Debt = ₹7 − ₹3 = ₹4 lakh.
Interpret the result
Equity remains ₹13 lakh. Assets of ₹17 lakh reconcile to ₹4 lakh debt plus ₹13 lakh equity. Only ₹3 lakh is cash.
What to remember
Ask what changed in resources, what changed in claims, and whether any transaction affected profit.