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How are revenue and expense related to accounting eqiation?

Posted by Jahanvi Gupta 3 years, 11 months ago

CBSE > Class 11 > Accountancy

1 answers

Gaurav Seth 3 years, 11 months ago

The fundamental accounting equation is assets= capital + liabilities.
As every accounting equation has two effects( debit and credit). Revenues lead to increase in assets or capital while expenses reduce assets and may also create liability. Revenue and expenses, therefore, are the reasons for stability and soundness of the balance sheet.

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