Accounting Equation Class 11 | Capital and Drawing| NEB|

Описание: Welcome to My Teacher!
Welcome to another learning session where we make accounting concepts easy and crystal clear for Class 11 students. In this video, we will deeply explore the Accounting Equation with special focus on Capital and Drawings.
Accounting Equation Class 11 | Capital and Drawing| NEB|

This video is especially prepared for Class 11 NEB Board students, but it will also help Class 12, BBS, BBA, and beginners in accounting.

🌟 Introduction to the Accounting Equation
The Accounting Equation is the backbone of double-entry bookkeeping. It explains the relationship between assets, liabilities, and owner’s equity (capital).

👉 Formula:
Assets = Liabilities + Capital
Assets = Properties owned by the business (cash, furniture, stock, buildings, debtors).
Liabilities = Amounts owed by the business to outsiders (loans, creditors, bills payable).
Capital = Amount invested by the owner; it shows the owner’s claim after paying liabilities.

The equation always stays balanced because every business transaction has two effects — if one side increases, the other side also increases or decreases to keep the equality intact.

🏦 Understanding Capital in Accounting
Capital is also called Owner’s Equity. It represents the value of the business that belongs to the owner.

🔑 Key Features of Capital:
1. It includes money or assets invested by the owner.
2. It increases when:
The owner adds more funds.
Business earns profits.

3. It decreases when:
The owner withdraws cash, goods, or assets (drawings).
The business incurs losses.
4. It appears under Liabilities side of the

balance sheet (because it’s a liability of the business towards its owner).
Example: If the owner invests Rs. 1,00,000, the capital of the business is Rs. 1,00,000. If the business earns Rs. 20,000 profit, capital increases to Rs. 1,20,000.

🛒 Understanding Drawings in Accounting
Drawings refer to money, goods, or assets taken by the owner for personal use.

🔑 Key Features of Drawings:
1. They reduce the owner’s capital, not business expenses.
2. They can be in the form of:
Cash withdrawals
Goods taken home
Assets like furniture used personally
3. They must be deducted from capital in the accounting equation.



Example: If the owner withdraws Rs. 10,000 for family expenses, both assets (cash) and capital decrease by Rs. 10,000.

👉 Effect on Equation:
Assets ↓ = Liabilities + Capital ↓
📊 Effects of Capital and Drawings on Accounting Equation
Let’s see different cases one by one

1. When Owner Introduces Capital
Assets increase (cash/goods).
Capital increases.
Example: Owner invests Rs. 80,000 cash.
Equation: Assets 80,000 = Liabilities 0 + Capital 80,000 ✅

2. When Owner Withdraws Cash (Drawings)
Assets decrease (cash)
Capital decreasess
Example: Owner withdraws Rs. 10,000.
Equation: Assets 70,000 = Liabilities 0 + Capital 70,000 ✅

3. When Business Earns Profit.
Assets increase.
Capital increases
Example: Profit Rs. 15,000 earned.
Equation: Assets 85,000 = Liabilities 0 + Capital 85,000 ✅

4. When Business Suffers Loss
Assets decrease.
Capital decreases.
Example: Loss Rs. 5,000.
Equation: Assets 80,000 = Liabilities 0 + Capital 80,000 ✅

🏷️ Importance of Capital and Drawings in Accounting
1. Follows Separate Entity Principle – Business is separate from the owner.
2. Ensures Correct Profit Calculation – Drawings are not expenses.
3. Helps in Financial Position – Capital minus drawings shows true owner’s equity.
4. Used in Balance Sheet – Owner’s Capital after drawings and profits appears as closing capital.
5. Exam Relevance – Questions on capital and drawings regularly appear in Class 11 exams.

❓ Expanded FAQ
1. Are drawings business expenses?
👉 No, they are not expenses. They reduce capital.

2. Why is capital called liability of the business?
👉 Because business treats the owner separately, so capital is payable to the owner.

3. What happens if drawings are not recorded?
👉 Capital will be overstated and financial position will look stronger than reality.

4. How do profits and losses affect capital?
👉 Profit increases capital, losses decrease capital.

5. Can drawings be non-cash?
👉 Yes. Goods or assets taken for personal use are also drawings.

6. Why is understanding capital and drawings important?
👉 Without it, you cannot prepare accurate balance sheets or analyze equity.

📚 Who Should Watch This Video?
✔️ Class 11 NEB commerce students
✔️ Class 12 students revising basics
✔️ BBS & BBA first-year students
✔️ Banking and competitive exam students
✔️ Beginners learning bookkeeping

❤️ Support & Connect
If you find this video useful:
👍 Like the video
💬 Comment your doubts
🔔 Subscribe to My Teacher
📢 Share with friends preparing for exams
✨ Together, let’s make Accounting simple, clear, and enjoyable!
#accountingequation
#class11accounting
#basicaccountingterms
#basisofaccounting
#account