Download as pdf
es aoutes by the same amount.
Effect of Transaction
ILLUSTRATION 1.
Suppose Gopal starts a new business and the following successive transactions
take place :—
S on Accounting Equations
Transaction 1 :
The effect of the t
75,000 in the form o}
form of capital. The tr
Gopal started business with 775,000 as capital.
ransaction will be that the firm has received assets totalling
f cash and the claims against the firm are also 375,000 in the
ansaction can be expressed in the fo
rm of an accounting equation
as follows :-—
Assets = Liabilities + Capital
Cash = Liabilities. + Capital
75,000 = 0 + 75,000
Transaction 2
2: Gopal purchased furniture for Cash %5,000.
The effect of this transaction is that the cash is reduced by %5,000, but a new asset
of the same amount has been acquired. The transaction decreases one asset and at the
same time increases the other asset with the same amount, leaving the total of the
assets unchanged. The equation now will appear as follows :-
Assets = Liabilities + Capital
Cash + Furniture = Liabilities. + Capital
Old Equation 75,000 + 0 = 0 + 75,000
Transaction —(-) 5,000 + 5,000 = 0 + 0
New Equation 70,000 + 5,000 = 0 + 75,000
J amaction 5: Gopal purchased goods for Cash 20,000,
AS a result of this transaction, cash balance is reduced and another asset (goods)
has come into existence, leaving the total of the assets unchanged. The equation wil
appear as follows :
As
cts,
- + Capital
Cash + Purniture + Goods = + Capital
Old Equation 70,000 + 5,000 + 0 = 0 + 75,000
Transaction (-) 20,000 + 0 + 20,000 0 - _ + 0
New Equation 50,000 + 5,000 + 20,000 + 75,000 Fransaetion 4+ Gopal purchased goods on eredit for 216,000,
This transaction will increase goods on the assets side and will ereate liability in
the form of creditors. (The persons from whom goods have been purchased on cr it
“uwcalled creditors.) The equation will be as follows
Assets Liabilities +
Cash + Fummiture + Goods Creditors. +
Old Equation 50,000 + 5,000 + 20,000 =o +
Transaction 0 +0 + 16,000 16,000 +
New Equation 50,000 + 5,000 + 36,000 = 16,000
Fransaction 5 + Goods costing 12,000 sold on credit for 215,000.
This transaction will give rise to a new asset in the form of Debtors to the extent
of £15,000. (Debtors are those persons to whom goods have been sold on credit). But
the goods will be reduced only by %12,000, the cost of goods sold. The net increase in
assets €3,000 is the amount of profit which will be added to the capital. The effect of
the transaction has been explained in the following equatio
Assets
Liabilities + Capital
Cash + Fumiture+ Goods + Debtors = Creditors + Capital
old Equation 50,000 + 5,000 + 36,000 + 0 16,000 + 75,000
Transaction 0 + 0 ~ 12,000 + 15000 = 0 + 3,000
= 16,000 + 78,000
New Equation 50,000 +
Transaction 6 :— Paid €1,000 for rent.
‘The effect of the transaction is that firstly, itreduces cash and secondly, as the rent
isan expense, it results ina loss which deereases the capital. The revised equation will
appear as follows —
Liabilities + Capital
Assets
Cash + Fumiture+ Goods + Debtors = Creditors + Capital
Old Equation 50,000 + 5,000 + 24,000 + 15,000 16,000 + 78,000
Transaction (-) 1,000 + 0 +0 +0 =0 ) 1,000
New Equation 49,000 + 5,000 + 24,000 + 15,000 16,000 + 77,000
From the study of the above transactions it may be concluded that every
transaction has a double effect and in each case Assets ~ Liabilities + Capita. In other
rue in all cases’, The last equation
words, it can be said that “Accounting Equatio
appearing in the books of Gopal may also be presented in the form of a statement
named as Balance Sheet. It will appear as shown below -—
BALANCE SHEET OF GOPAL
as at
Liabilities + Capital z Assets x
Creditors 16,000, Cash 49,000
Gopal’s Capital 77,000 Furniture 5,000
Goods 24,000
Debtors 15,000
93,000 93,000 ee
64 ACCOUNTING EQUATIONS
————
ILLUSTRATION 2.
Show the Accounting Equation on the basis of the following transactions and
prepare a Balance Sheet on the basis of the last new equation
as ee Ne ee “7
1. Mukesh started business wi 80,000
2. Purchased goods for cash 28,000
20,000
. Purchased goods on credit
| Purchased furniture for cash 6,000
3
4
5. Paid rent 2,000
6. Received Commission 500
7. Withdrew cash for private use 3,000
8, 40,000
9
| Sold goods on credit (cost price £30,000)
15,000
| Paid to creditors
| — oe SOLUTION (2)
No Transaction
| Mukesh started business with
H0,000
é Bauation
2. Purchased goods for eash 228000 (-)
E New Equation
3. Puehased goods on creat
20,000
e New Fauation
4. Porehased furniture for Cash o
"26.000
E "New Equation
5. Paid Rent £2,000 0
[New Equation
6. Received Commission £500 +
"New Equation
7. Withdrew Cash for private use
53,000 o
‘New Bguation
Sold goods on creat for £40,000
(Cost 830,000)
[New Equation
9. Paid wo Creditors £15,000 o
Final Equation
ACCOUNTING EQUATION
Assets
Cash
0,000
0,000
28,000
52,000
°
52,000
6,000
446,000
2.000
“S00
44,500
3.000
41,500
°
41,500
15/000,
26,500
Stock
«
«
24,00¢
28,006
20,00¢
48,000
©
48,0
48,000
«
48,006
©
48,006
30,006
18,006
©
18,000
Furniture
6.000
6.000
6,000
6,000
6.000
6,000
6,000
Debtors
40,000
40,000
40,000
Liabilities
Creditors
20,000
o
20,000
°
20,000
o
20,000
°
20.000
15.000
5,000
380,000
2,000
78,000
500
78.500
3,000
75,300
10,000
85,500
85,500 a.
EXPLANATION
Serial Transactions Accouns Affected
- Assets Liabilities and Capital
1. Capital brought in Cash increases Capital increases
Purchased goods for cash Stock inereases
Cash decreases
3, Purchased goods on credit Stock increases. Creditors increase
4. Purchased furniture for Cash decreases
cash Furiture increases
5. Paid rent Cash decreases Rent = Expenses
Therefore, Capital decreases
6. Received Commission ‘Cash increases ‘Commission = Income
‘Therefore, Capital increases
7. Withdrew cash for private Cash decreases Capital decreases.
use
8 Sold goods on credit for Debtors increase by, Capital increases by
%40,000 (Cost price 740,000. Stock 710,000
730,000) decreases by 230,000
9. Paid to creditors ‘Cash decreases Creditors decrease
BALANCE SHEET OF MUKESH
as at os
Liabilities + Capital Amount Assets Amount
z z
Creditors 5,000 Cash 26,500
Capital 85,500. Stock 18,000
Furniture 6,000
Debtors 40,000,
90,500 90,500
ILLUSTRATION 3.
Prepare “Accounting Equation’ from the following
(a) Started business with cash 71,00,000.
(6) Purchased goods for cash 720,000 and on credit £30,000,
(c) Sold goods for cash costin,
1 710,000 and on credit costing 715,000 both at
4 profit of 20%,
(Chandigarh, 2018) SOLUTION : (3)
ACCOUNTING EQUATION
gE ‘Transaction Assets
i. i wisi -
+ Siok
a) Suan busines wink 1.00000 + +
ation vono00 + °
(0) Psa oe fo Ca £20.00
0 Sioa e000 © anoo0 + 50000. +
New Equation som + 50000 >
(© $e goa for Cat coming
o.oo and on Ces soning
Eisomecmasprantet 0% 6) 12000) 25000. +
Final Egon 1 sco + 25000 +
(0) Good costing £10,000 aa profi of 20%
prot = 19000 x 22,» 2,00, Sale Pie 10000 +2000 = 1
uy Goods costing £15,000 stat ro of 2%
Prot = 15,00 « 2 «3,00: Sale Price 1500 + 3.900 ~ 18000
i Prost on sae €2,000 + €3.000 ~ €5,000 is aed v0 Cepia
18,000
18,000
abies
Creditors
30,000
Hl
wi
3
3 ILLUSTRATION 4.
Show the effect of the following transactions on Assets, Liabilities and Capitay
through accounting equation
z
(a) Started business with cash 1,20,000
(6) Rent received 10,009
(c) Invested in shares 50,009
(a) Received dividend 5,000
(@) Purchased goods on credit from Ragani 35,000
() Paid cash for household expenses 7,000
(2) Sold goods for eash (costing 210,000) 14,000
(A) Cash paid to Ragani 35,000
(Deposited into bank 20,000
(Solution on Next Page) (NCERT Q. 7)
——————
ILLUSTRATION 5.
Transactions of M/s Vipin Traders are given below :
Show the effects on Assets, Liabilit
es and Capital with the help of accounting
equation,
z
(@) Business started with cash 125,000
(6) Purchased goods for cash
50,000
(c) Purchased furniture from R.K. Fumiture on Credit 10,000
(4) Sold goods to Parul Traders (Costing €7,000 vide bil no 5,674) 9,000
() Paid cartage 100
() Cash Paid to R.K. Furniture in full settlement 9,700
(2) Cash sales (costing 210,000) 12,000
(a) Rent received 4,000
(0 Cash withdrew for personal use 3,000
(Solution on Page 6.10) (NCERT Q. 9)
canal
ILLUSTRATION 6.
(0 ‘Started busines with Cash €1,00,000
(Gi) Paid rent in advance %3,000,
(ii) Purchased woods for cash 25
ri 0,000 and Credit €20,000,
(®) ‘Sold goods for Cash %80,00
10 costing 240,000.
5 salary outstanding %1,000,
() Bought motorcycle for personal use 230,000.
(Solution on Page 6.11) a
SOLUTION (4)
ACCOUNTING EQUATION z
Sho Transaction Aseis een = abies > Capital) |
cath + Shares + Stock + “Bank = Creditors = Capital 5
(a) Stara business with Cash z
T0000 1.20.00 oe ot o 0+ 120000 =
Pauation 1.20000 + 0+ o+ 8 0+ 120000 =
1) Rent received £10,000 + “Topo + ° + O° o- 8 + “Too. 5
‘New Fquation 130,000 + 0+ 0+ o- 0 + 130000 2
{o) vested in shares £50,000 © "s0900 + 30.000 + oF 0 - oo?
‘New Equation 30,000 + 50,000 + o + o = 0+ 130000
a) Receives Dividend £5,000 © "S00 + ot ot ° o> 000
‘New Eauation s5.000 + 50.000 + o + o o> 135.000
(e) Purchased goods on eredit ot 0+ 350000 + 0 = 35000 > °
‘S000
New Equation 15,000 + 35,000 = 38000 >
(9 Paid cas or household expenses
7.000 © 7.000 + oe o+ o- oo
New tation rao + $9000 + 35000 + © = 35000 =
(4) Sold goods for cash (Costing
10,000) for €14.000 (1400+ 0G) 10.000 + o- o +
New Equation 52,000 + £0000 + 28.000 + o = 35000 +
(0) Cash paid 6 Ragan €35,000 38.000 + oF ot 0 = c3so0 =
‘Nev Eauation 57.000 + $0.00 + 25000 * ° o 4
(0 Deposited into bank £20,000 © 20000. + oF 0 + 20,000 oF
Fina Equation 37.000 + $0000 + 25000 + 20.000 o-
os SOLUTION : (5) ACCOUNTING EQUATION :
S.No Transaction Assets = Testes + Capea,
Cash + Stock + Fumiture + Debtors = Creditors + Capital |
(a) Stared sins with Cash
25,000 + oe oe o- © + 125,000
3125,000
Equation 25,000 + o + o + o = 0 + 1,25.000
(@) Purchased goods foreash © “S000 + 53.000 + ot 0: oF °
50,000
New Equation 75,000 + 50,000. + o+ o 0 + 125,000
(6) Porchassd Famitore from RK
Furniture on credit £10,000 oe 0 + 10,000 + ° 10.000 + °
New Equation 75000 + 50,000 + 10,000 + ° 10,000 + 1,25,000
(2) Sold goods to Paral Traders
Costing £7,000 Fr 29,000 © 1000 + 0 + 9,00 = © + 2,000
New Euston 75000 + 43,000 + 10,000 + 9,000 10,000 + 1.27.00 |
6) Paid Canage #100 O10 + ot oF ° 2” 10
New Equation 74900 + 45,000 + 10,000 + 9,000 = 10,000 + 1,26.900 |
(P)Paid cash RK. Puritue in full |
seitlement £9,700 © 9,700 + oe os © = (10000 + 300
New Equation 65200 + 43,000 + 10,000 + 9,000 0+ 127200 |=
(2) Cash sales Costing 210,000) for 3
#12000 © 12,000.) 16000 + 0 o- © + 2,000 |
[New Equation 7120 + 33000 + 10.000 + 9,000 = © + 129200
hy Ren received £4,000 ©) 4000 + ot ot ° 0 + "4000
New Equation 81,200 + 33000 + 10,000 + 9,000 0 + 133,200
(Cash withdrew for personal use |
£5,000 3.000 + o+ oe o © 3.000
inal Equation 78200 + 33000 + 10,000 + 9.000 0 + 130200 | = SOLUTION : (6)
w
wy
”
oo
ACCOUNTING EQUATION
Transaction
cash
‘Stare business with Cash 1,00,000
Faquation 1,00,000
Paid rt in advance 3.000
New Equation 97,000
Purchased goods for cash
£50,0 andere £20,000 0,000
‘New Equation 47,000
Sold goods fo eash £80,000
costing €40,000 + 80,000
New Equation 127,000
Pid salary in cash €4.500 and
salary oustanding? €1,000 4.50
New Equation 1.22,500
ought motor eyele for
‘personal use 230.000 30,000
Final Equation 92,500
Assets
Stock +
70,000
70,000
40,000
30,000
°
30.000
°
30,000
Prepaid
Exp.
3,000
3,000
3.000
°
3,000
°
3,000
°
Liabilities
Creditors +
°
o-
20,000 +
oe
20,000 +
Ouistan-
ding exp.
1.000
1,000
°
1,000
+ students are advise to refer to Chapter 9 for understanding the meaning of advance payments and outstanding expenses. ILLUSTRATION 7.
Show the effect of following transactions on the accounting equation
(1) Manoj started business with z
(i) Cash 2,30,009
(ii). Goods 100,009
(it) Building 2,00,009
(2) He purchased goods for cash 50,009
(3) He sold goods for cash (costing 720,000) 35,000
(4) He purchased goods from Rahul 55,000
(5) He sold goods to Varun (costing 752,000) 60,000
(6) He paid cash to Rahul in full settlement 53,000
(7) Salary paid by him 20,000
(8) Received cash from Varun in full settlement 59,000
(9). Rent outstanding 3,000
(10) Commission received by him 13,000
(11) Amount withdrawn by him for personal use 20,000
(12) Depreciation charged on building 10,000
(NCERT 0. 8
(Solution on Next Page)
ILLUSTRATION 8.
Prepare accounting equation from the following
(a) Started business with cash %1,00,000 ard goods worth 720,000.
(5) Sold 50% of the above goods at a profit of 2,000 on credit to Ram.
(©) Ram paid 90% of his amount in full settlement. (KVS 2019)
SOLUTION : ACCOUNTING EQUATION
Transaction ‘ Assets. - Capital
Cash + Stock + Debtors Capital
(a) Started business 1,00,000 + 20,000 1,20,000
(b) Sold 50% of above
g00ds at a profit of
22,000 on credit 10,000 + 12,000,
1,00,000 + 10,000 + 12,000
(c) Ram paid 90%
amount in full
settlement 10,800, - 12,000 () 1,200
Final Equation 1,10,800° + —10,c00 = 1,20,800 SOLUTION : (7)
ACCOUNTING EQUATION
S.No
Transaction ‘Assets = Liabities + capital \S
Cash + Stock + Building + Debtors = Creditors + Outstan- + Capital
ding exp.
(1) Started husiness with Cash, :
po0ds and ailing 2,30,000 + 100,000 + _2,00,000 o 5,30,000
Equation 2,30,000 + 1,00,000 + 2,00,000 530,000
(2) Purchased goods for Cash = "50,000 + "50,000 + 0 + 0
"New Equation 1,80,000 + 1,$0,000 + —2,00,000 - + 530,000
1G) Sold goods costing #20,000
for 238,000 + 35,000 - 20,000 + ° + 15,000
‘Now Equation 2,15,000 + 1,30,000 + —2,00,000 + 545,000
(4) Purchased goods from Rahul 0+ "35.000 + ° = 8,000 + °
"New Equation 2.15000 + 1,85,000 + 2,00,000 55,000 + 545,000
(5) Sold goods to Varun costing
52,000 for £60,000 0 52,000 + 0+ 60,000 = ° * 8000
"New Equation 2,15,000 + 1,33,000 + 2,00,000 + 60,000 = $5,000 ~ 553,000
(6) Pid ash to Ral in full,
settlement £83,000 ~ $8,000 + oF oF 0 ~55,000 ~ 2.000)
"New Equation 1,62,000 + 1,33,000 + 2,00,000 + 60,000 = ° 535.000
(7) Salary pai = “20,000 + oF o+ o- ° 20.000
[New Equation 142,000 + 1,33,000 + 2,00,000 + 60,000 = 0 + $38,000
(8) Received ash from Varun in
full selement £59,000 + 59.000 + oF 60,000 ° 1,000
‘New Faaation 201,000 + 133,000 + ° ° 534.000
Continued on nest page (©) Rent Outstanding os oF °
New Fquation 201,000 + 1.33.00 + 300,000
(10) Commission received 13,000 + or o
New Equation 2.14,000 + 133,000 + 200,000
(11) Widen for personal use 20,000 + o+ °
(12) Depreciation on Bung Oo e000
1,94,000 + 1,33,000 + 150,000
Fina Equation
°
°
o
°
o
°
"Students are advised 0 refer to Chapter 9 for understanding the meaning of outstanding expenses and depreciation,
3,000
3,000
3,000
3.000
3,000
3,000
531,000
13,000
544,000
20,000
5.24,000
10,000
5.14,000 ND
ji,USTRATION
‘rove that the accounting equation is satisfied in all the following transactions of
sudhit : 5
1, Started business with Cash 850,000 and goods 20.000.
2, Bought goods for Cash 215,000 and on credit for 710,000.
45, Goods Costing €24,000 sold at a profit of 33 % Half the payment received in
cash,
44, Purchased furniture for office use 6,000 and for household use of Sudhir
£4,000.
(Solution on Next Page)
sa
{LLUSTRATION 10.
If the Capital of a business is %1,00,000 and outside liabilities are %60,000,
Calculate total assets of the business.
SOLUTION :
Assets = Liabilities + Capital
260,000 + £1,00,000 = 1,60,000
ILLUSTRATION 11.
Ir total assets of a business are €2,00,000 and net worth (Capital) is €1,50,000,
Calculate Creditors.
SOLUTION :
Creditors (Liabilities) = Assets ~ Capital
= 32,00,000 ~ 1,50,000 = 250,000
ILLUSTRATION 12.
A commenced business on Ist April, 2017 with a Capital of %5,00,000. On 31st
March, 2018, his assets were worth %7,80,000 and liabilities %70,000. Find out his
closing capital and profits eamed during the year. (Chandigarh 2019)
= Closing Assets — Closing Liabilities
= 7,80,000 ~ 70,000 = 27,10,000
Profit = Closing Capital ~ Opening Capital
= ¥7,10,000 — 25,00,000 = &2,10,000 SOLUTION -(9)
SNe, Tramacton
1. Stantod hoses with Cash
50 000 ard panes 820.000
2. Bought goods for Cash £15,000
sno sre for £10,000 o
New Eauation
3. Goods costing £24,000 soldat
provi of 335% Halt the payment
received in Cash +
New Equation
4 Purchased furiture for office use
6.000 and for household use of
Sudnie 24.000 o
Final Equation
ACCOUNTING “QUATION
Avvets
Cash 4 Sock + Debtors
50.000 + 20900. + o
£0,000 + 20900. + °
15000 + 28:00 + °
35.000 + 45,000 + o
16,000 + 16,000
51,000. + + 16,000
10,000 o+ o
41,000 2100 + 16,000
Pur
6.000
6.000
= 10,000
= 10,000
8.000
78.000
4.000
74,000 dee eee
ACCOUNTING EQUATIONS 6.17
Sano
JLLUSTRATION 13.
(a) Surender Mohan started business on Ist April, 2022 with Capital of €7,50,000
and a loan of ©2,00,000 taken from Punjab National Bank. On 31st March, 2023
; his assets were %15,00,000, Find out his Capital on 31st March, 2023 and
profits made or losses incurred during the year 2022-23.
(6) Ifinthe above illustration, the proprietor had introduced additional capital of
€1,25,000 and had withdrawn %40,000 for personal purposes, find out the
prot
SOLUTION :
{o) Closing Capital ~ Closing Assets ~ Closing Liabilities
= %15,00,000 — %2,00,000
713,00,000
Profit = Closing Capital — Opening Capital
%13,00,000 — %7,50,000
= %5,50,000
(b) Profit Closing Capital + Drawing - Additional Capital - Opening Capital
= %13,00,000 + 40,000 - 1,25,000 — 27,50,000
%4,65,000
ILLUSTRATION 14.
Give an example for each of the following type of transactions
(i) Increase in one asset, decrease in another asset
(ii) Inerease in asset, increase in liability
(iii) Increase in asset, increase in owner's capital.
(iv) Decrease in asset, decrease in liability.
4 (v) Decrease in asset, decrease in owner's capi
SOLUTION :
(i) Purchase of Machinery for Cash: _ Increase in Machinery
and éeorease in Cash
(ii) Purchase of Machinery on Credit Increase in Machinery
and increase in liability
(iii) Capital introduced by proprietor Increase in Cash
and inerease in Capital
(iv) Payment to Creditors Decrease in Cash
and decrease in Creditors
(») Cash withdrawn by proprietor from Decrease in Cash
the business for personal use and decrease in Capital
:
Meaning of Debit and Credit
Alll accounts are divided into two sides. The left side of'an account is arbitrarily or
traditionally called Debit side and the right side of an account is called Credit side. In
the abbreviated form, Debit is written as Dr. and Credit is written as Cr. For example, isi
6 ACCOUNTING EQUATIONS
Dr. LIABILITY, CAPITAL OR INCOME ACCOUNT
Record decrease in these accounts) | Record increase in these accounts on
con this side. this side.
ILLUSTRATION 15.
On whi le will the increase in the following accounts be recorded? Alsg
mention the nature of Account
1. Cash 5. Proprietors Account
2. Machinery 6. Rent Received
3, Debtor 7. Salary Paid
4. Creditor 8. Interest Received
SOLUTION :
(Nature of Account) (Nature of Account)
1. Debit — Asset 5. Credit — Capital
2. Debit — Asset 6. Credit — Income
3. Debit — Asset 7. Debit — Expenses
4. Credit — Liability 8. Credit — Income
ILLUSTRATION 16.
On which side the decrease in the following acenunts be recorded? Also mention
the nature of Account —
1. Furniture 4. Salary Paid
2. Bank 5. Salary Outstanding
3. Proprietor’s Account 6, Subhash C a Customer
SOLUTION :
(Nature of Account) (Nature of Account)
1. Credit — Asset 4, Credit — Expenses
2. Credit — Asset 5. Debit — Li
3. Debit — Capital Ae 6. Credit — Asset
——
ILLUSTRATION 17.
From the followin,
‘account will be debited
1.
2
3
4,
5
6.
7
8
9,
'e transactions, state the nature of accounts and state which
and which account will be credited :
Sahdev started business with cash %5,00,000,
Purchased goods for cash %20,000,
purchased goods from Raghubiron credit for $25,000,
Purchased furniture from Fancy Furitute House for 1,50,000 on credit
Sold goods for cash 30,000,
Sold goods to Yuvraj on credit for 850,000.
Cash paid to Raghubir 220,000
Cash received from Yuvraj 215,000,
Paid rent 210,000, ACCOUNTING EQUATIONS
i é Involved z
Sahdey started business with Cash Asset Increase $00,000
Cash €5,00,000 Capital Capital Increase 500,000
2, Purchased goods for Cash Purchases Expense | Increase 20,000
220,000 Cash Asset ect 20,000
3, Purchased goods from | Purchases | Expense Increase 25,000
Raghubir on credit for Raghubit Liability Increase 25,000
225,000 |
4, Purchased fumiture from Fumiture Asset Increase _1,50,000
Fancy Fumiture House for Fancy Liability Increase 150,000
21,50,000 on credit | Fumiture
ITF “House
5, Sold goods for cash 830,000 Cash Asset. Increase. —30,000_
SELL Sales Revenue Increase 30,000
6. Sold goods to Yuvraj on Yuvraj Asset Increase. 50,000.
eredit ®50,000 Sales Revenue Increase
7, Cash paid to Raghubir| Raghubir Liability | Decrease
£20,000 Cash Asset | Decrease
& Cash received from Yuvraj Cash Asset Increase
15,000 “Yuvraj Asset | Decrease
9. Paid rent %10,000 | Rent Expense | Increase
: | Cash Decrease
ILLUSTRATION 18.
(Open “T° shape account for furniture and write the Following on the proper side :
1, Furniture purchased for €20,000
2. Fumiture sold costing &5,000
3, Fumiture again purchased for 78,000
4, Old Fumiture discarded for 82,500
5. Value of Furniture was reduced by %2,000
SOLUTION :
Dr. FURNITURE ACCOUNT Cr.
z == z
Record Inerease in funiture on this
side
1. To Cash ~ Furmiture Purchased
3. To Cash ~ Furiture Purchased
Total
Record decrease in furniture on
this side
20,000 2. By Cash — Furiture Sold 5,000
8,000 4. By Fumiture Discarded 2.500
5. By Depreciation 2,000
28,000 Total 9.500
Balance 8,500
28,000 28,000 eae *F
ACCOUNTING EQUATIONS
ILLUSTRATION 19. ;
Open “T" shape account of our ereditor ‘Sanjay and write the following
transactions on the proper side :
1. Purchased goods from Sanjay on Credit for £40,000.
2. Paid to Sanjay %25,000.
3. Again purchased goods from Sanjay on Credit for %16,000.
4. Goods retumed to Sanjay for €2,000.
5. Paid to Sanjay €20,000,
SOLUTION :
Dr. SANJAY (Creditor’s A/c)
z
Record decrease on tis side Record inerease on this side
2, To Cash 25,000 1. By Purchases 40,000
4. To Goods Retumed 2,000.3, By Purchases 16,000
5. To Cash 20,000 _
Total 47,000 Total 56,000
Balance 9,000
ILLUSTRATION 20.
Put the following on the proper side of Debtor’s A/c, Creditor’s A/e and
Cash Ale -—
(a) Sold goods for Cash
(®) Sold goods to X'on Credit
(©) Received cash from.’
(4) Purchased goods from ¥ on Credit
(©) Purchased goods from ¥ for cash
(Paid w ¥
SOLUTION
Dr. __ CASH ACCOUNT Ce
cI Be Se a
(a) To Sales, 25,000 (e) By Purchases 8,000
(Tox 28,000 (f) By ¥ 15,000
53,000 23,000
Balance 30,000
$5,000 ACCOUNTING EQUATIONS
Dr X Debtor's Account) S
(b) To Sales
Dr. ¥ (Creditor's Account)
(f) To Cash 15,000 | (d) By Purchases
Balance 7,000
22,000 22,000
ILLUSTRATION 21.
From the following particulars prepare the Proprietor’s Capital Account for the
year ended 31st March 2023 :
2022 |
April |__| Started business with cash %75,000
June 17 Withdrew from business for personal use 210,000
July 31 Life insurance premium paid 13,000
Sept. 25 Sold personal investments worth 215,000 at 5% profit and brought into
business on the same date.
2023
March 31 |Loss for the year 75,000
SOLUTION :
Dr. CAPITAL ACCOUNT Cr.
Date Particulars
be | Increase willbe |
recorded on this side : | recorded on this side :
2022 | 2022 |
June 17 To Bank (Drawings) 10,000 | April | By Bank 75,000
July 31 To Bank (Drawings) 13,000 Sept. 25 By Bank
2023 (15,000 x 105/100) 15,750
March 31 To Profit & Loss A/c
(Loss)
March 31 To Balance ¢/d
SHORT ANSWER QUESTIONS
ee anatian halde cand under all circumstances.’’ Give Ans. Credit side.
——————
PRACTICAL QUESTIONS
(Question Nos. 1 to 21 are strictly in the serial order of Illustrations)
(. |. Prepare Accounting Equation from the following :—
1. Sandeep started business with Cash
2. Purchased furniture for cash 5,000
3.| Purchased goods for cash / 20,000 —
4. Purchased goods on credit 36,006
5. Paid for rent 0a
6. Goods costing %40,000 sold ata profit of 20% for cash
[Ans. Assets : Cash %1,22,300 + Fumiture %5,000 + Stock %16,000 = Li
Creditors 36,000 + Capital ®1,07,300.]
Q.2.(A), Show the Accounting Equation on the basis ofthe followin,
balance sheet on the last new equation balances
abilities
1 and present
(ii), Bought furniture for
(iii) Purchased goods on credit
(iv) Sold goods on cash (cost 2500) for
(0) Received rent
(vi) Purchased goods for cash
(vii), Withdrew for personal use
(viii) Paid to creditors
(ix) Paid for salaries
—________ | 2
[Ans Assets : Cash %48,100 + fumiture £500 + stock 4,500 = Liabilities:
creditors 3,600 + capital %49,500; Balance Sheet total 53,100.)
Q. 2 (B). Prove that the Accounting Equation is satisfied in all the following
transactions of Rajaram. Also prepare a Balance Sheet :—
+ Started business with Cash 21,20,000,
Purchased a typewriter for Cash for €8,000 for office use.
Purchased goods for 50,000 for cash,
Purchased goods for €40,000 on credit.
Goods costing 760,000 sold for *80,000 on credit,
6. Paid for Rent 71,500 and for salaries 22,000.
7. Received %800 for Commission.
8. Withdrew for private use €5,000 in cash,
Uns. Assets : Cash 854,300 + Typewriter €8,000 + Stock 330,000 + Debtors
) 280,000 = Li iH
ilies: Creditors £40,000 + Capital €1,32,300; Balance Sheet Total
21,72,300,]
.S. Prepare Accounting Equation from the following ;
(2) Started business with Cash %2,00,000,
(b) Purchased goods for Cash 860,000 and on Credit 31,50,000,
(6) Sold woods for Cash costing £40,000 ata profit of 20% and on Credit costing
372,000 ata profit of 25%,
(d) Paid for Rent %5,000,
Ens, Assets: Cash @1,83,000 + Stock 98,000 + Debtors £90,000
Creditors %1,50,000 + Capital 22,21,000}
Liabilities ACCOUNTING FQUATIONS
(4, Prepare Account
You might also like
- The Subtle Art of Not Giving a F*ck: A Counterintuitive Approach to Living a Good LifeFrom EverandThe Subtle Art of Not Giving a F*ck: A Counterintuitive Approach to Living a Good LifeRating: 4 out of 5 stars4/5 (5835)
- The Gifts of Imperfection: Let Go of Who You Think You're Supposed to Be and Embrace Who You AreFrom EverandThe Gifts of Imperfection: Let Go of Who You Think You're Supposed to Be and Embrace Who You AreRating: 4 out of 5 stars4/5 (1093)
- Never Split the Difference: Negotiating As If Your Life Depended On ItFrom EverandNever Split the Difference: Negotiating As If Your Life Depended On ItRating: 4.5 out of 5 stars4.5/5 (852)
- Grit: The Power of Passion and PerseveranceFrom EverandGrit: The Power of Passion and PerseveranceRating: 4 out of 5 stars4/5 (590)
- Hidden Figures: The American Dream and the Untold Story of the Black Women Mathematicians Who Helped Win the Space RaceFrom EverandHidden Figures: The American Dream and the Untold Story of the Black Women Mathematicians Who Helped Win the Space RaceRating: 4 out of 5 stars4/5 (903)
- Shoe Dog: A Memoir by the Creator of NikeFrom EverandShoe Dog: A Memoir by the Creator of NikeRating: 4.5 out of 5 stars4.5/5 (541)
- The Hard Thing About Hard Things: Building a Business When There Are No Easy AnswersFrom EverandThe Hard Thing About Hard Things: Building a Business When There Are No Easy AnswersRating: 4.5 out of 5 stars4.5/5 (350)
- Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic FutureFrom EverandElon Musk: Tesla, SpaceX, and the Quest for a Fantastic FutureRating: 4.5 out of 5 stars4.5/5 (474)
- Her Body and Other Parties: StoriesFrom EverandHer Body and Other Parties: StoriesRating: 4 out of 5 stars4/5 (824)
- The Sympathizer: A Novel (Pulitzer Prize for Fiction)From EverandThe Sympathizer: A Novel (Pulitzer Prize for Fiction)Rating: 4.5 out of 5 stars4.5/5 (122)
- The Emperor of All Maladies: A Biography of CancerFrom EverandThe Emperor of All Maladies: A Biography of CancerRating: 4.5 out of 5 stars4.5/5 (271)
- The Little Book of Hygge: Danish Secrets to Happy LivingFrom EverandThe Little Book of Hygge: Danish Secrets to Happy LivingRating: 3.5 out of 5 stars3.5/5 (405)
- The World Is Flat 3.0: A Brief History of the Twenty-first CenturyFrom EverandThe World Is Flat 3.0: A Brief History of the Twenty-first CenturyRating: 3.5 out of 5 stars3.5/5 (2259)
- The Yellow House: A Memoir (2019 National Book Award Winner)From EverandThe Yellow House: A Memoir (2019 National Book Award Winner)Rating: 4 out of 5 stars4/5 (98)
- Devil in the Grove: Thurgood Marshall, the Groveland Boys, and the Dawn of a New AmericaFrom EverandDevil in the Grove: Thurgood Marshall, the Groveland Boys, and the Dawn of a New AmericaRating: 4.5 out of 5 stars4.5/5 (266)
- A Heartbreaking Work Of Staggering Genius: A Memoir Based on a True StoryFrom EverandA Heartbreaking Work Of Staggering Genius: A Memoir Based on a True StoryRating: 3.5 out of 5 stars3.5/5 (231)
- Team of Rivals: The Political Genius of Abraham LincolnFrom EverandTeam of Rivals: The Political Genius of Abraham LincolnRating: 4.5 out of 5 stars4.5/5 (234)
- On Fire: The (Burning) Case for a Green New DealFrom EverandOn Fire: The (Burning) Case for a Green New DealRating: 4 out of 5 stars4/5 (74)
- The Unwinding: An Inner History of the New AmericaFrom EverandThe Unwinding: An Inner History of the New AmericaRating: 4 out of 5 stars4/5 (45)
