Basic Accounting
Build a balance sheet
When a business borrows ₹20,000, did it get richer?
Borrowing increases cash and debt by the same amount. Equity is the residual claim after liabilities.
Assets = Liabilities + Equity
Every asset is funded by a creditor or an owner. Subtract liabilities from assets to get equity. In the example, ₹80,000 − ₹50,000 = ₹30,000.
A café has ₹80,000 in assets and ₹50,000 of liabilities. Equity is ₹30,000.
Every asset is funded by a creditor or an owner. Subtract liabilities from assets to get equity. In the example, ₹80,000 − ₹50,000 = ₹30,000.
The café borrows another ₹20,000 and holds the cash. What is its equity immediately afterward?