Accounting Equation

As per accounting equation = Assets = Capital + Liability

Lets see one example – John started Business with cash $ 50000. The impact of this
transaction will be as follows
2. John purchased furniture costing $ 10000.
3. John purchased stock of goods $ 2000 on credit.
4. John sold goods cost price $ 1000 at $ 1500.
Asset = Capital + Liabilities

1. Cash 50000 = 50000

2. Furniture 10000 = 50000

Cash 40000

50000

3 Furniture 10000 = 50000 + Creditors 2000

Cash 40000

Stock 2000

52000

4. Furniture 10000 = 50000 + Creditors 2000

Cash 41500 Profit 500

Stock 1000 50500

52500

Q – 2 Show accounting equation for the following transactions.

1. Mr. Rick started a business with cash $ 30000.
2. Mr. Rick purchased a machine for $ 12000.
3. Mr. Rick purchased some goods for sale $ 5000.
4. Mr Rick sold goods costing $ 3000 at 3500.
Q – 3 (a) Show the accounting equation for following transaction
(a) Started business with $ 50000.
(b) Purchased goods for $ 5000 on credit.
(c) Sold goods cost price $ 3000 at $ 7000.
(d) Purchased furniture for $ 2000.
(e) Deposited $ 1000 cash into bank.

(b) Show accounting equation from the following transactions.

(i) Mike started business with cash 50,000

(ii) Bought furniture for cash 500
(iii) Purchased goods on credit 4,000
(iv) Sold goods on cash (cost $ 500) for cash 700
(v) Received rent cash 200
(vi) Purchased goods for cash 1,000
(vii) Withdrew cash for personal use 700
(viii) Paid to creditors cash 400
(ix) Paid for salaries cash 200

Q – 4 Prove that the Accounting Equation is satisfied in all the following transactions of
Mr. Vikalp
1. Started business with Cash $ 1,50,000.
2. Purchased a Furniture on credit for $ 6,000 for office use.
3. Purchased goods for $ 50,000 for cash.
4. Purchased goods for $ 10,000 on credit.
5. Goods costing $ 40,000 sold for $ 50,000 on cash.
6. Paid for Rent $ 1,500 and for salaries $ 2,000.
7. Purchase goods on cash $ 12000.
8. Withdrew for private use $ 5,000 in cash.
Q – 5 What will be the effect of the following on the Accounting Equation?
(i) Harish started business with cash $ 1,80,000.
(ii) Purchased goods for cash $ 60,000 and on credit $ 30,000.
(iii) Sold goods for cash $ 40,000; costing $ 24,000.
(iv) Rent paid $ 5,000; and rent outstanding $ 2,000.
(v) Sold goods on credit $ 50,000 (costing $ 38,000).
(vi) Salary paid in advance $ 3,000.

Q – 6 Prepare accounting equation from the following.

Date Details $

1 June Sandeep started business with cash 1,00,000

2 June Purchased furniture for cash 5,000
3 June Purchased goods for cash 20,000
4 June. Purchased goods on credit 36,000
5 June Paid for rent 700
6. June Goods costing $40,000 sold at a profit of 20% for cash

Q – 7 Show the Accounting Equation on the basis of the following.

S. no Details $

1. Mona started business with cash 50,000

2. Bought furniture for 500
3. Bought goods on credits 4,000
4. Sold goods on cash (cost $500) for 700
5. Rent Received 200
6. Bought goods for cash 1,000
7. Withdrew for personal use 700
8. Paid to creditors 400
9. Paid for salaries 200
10. Introduced further capital 500
Q – 8 Prove that the accounting equation is satisfied in all the following transactions of Rajaram.
1. Started business with cash$1,20,000
2. Purchased a typewriter for cash $ 8,000 for office use
3. Purchased goods for$ 50,000 on cash
4. Purchased goods for$ 40,000 on credit
5.Goods costing $ 60,00 sold for$80,000on credit
6. Paid for rent $1,500 and for salaries $ 2,000
7. Received $ 800 for commission
8. Withdrew for private use $ 5,000 in cash

Q – 9 Mohit has the following transaction. Prepare accounting equation

S.no Details $

1. Business started with cash 1,75,000

2. Purchased goods from Rohit 50,000
3. Sold goods on credit to Manish (costing $17,500) 20,000
4. Purchased furniture for office use 10,000
5. Cash paid to Rohit in full settlement 48,5000
6. Cash received from Manish 20,000
7. Rent Paid 1,000
8. Cash withdrawn for personal use 3,000
Q - Give one example of each of the following transactions:
(i) Increase in an asset and a liability.
(ii) Decrease in an asset and a liability.
(iii) Increase in assets and capital.
(iv) Decrease in assets and capital

Q – 10 Prepare an Accounting Equation on the basis of the following transactions:

(i) Started business with cash $ 70,000.
(ii) Credit purchase of goods $ 18,000.
(iii) Payment made to creditors in full settlement $ 17,500.
(iv) Purchase of machinery for cash $ 20,000.
(v) Depreciation on machinery $ 2,000.

Q – 11 Raghunath had the following transactions in an accounting year:

(i) Commenced business with cash $ 50,000.
(ii) Paid into bank $ 10,000.
(iii) Purchased goods for cash $ 20,000 and credit $ 30,000.
(iv) Sold goods for cash $ 40,000 costing $ 30,000.
(v) Rent paid $ 500.
(vi) Rent outstanding $ 100.
(vii) Bought furniture $ 5,000 on credit.
(viii) Bought refrigerator for personal use $ 5,000.
(ix) Purchased motorcycle for cash $ 20,000.
Q.12 Show an Accounting Equation for the following transactions:
(i) Dilwan commenced business with cash ₹ 50,000 and ₹ 1,00,000 by cheque; goods ₹
60,000; machinery ₹ 1,00,000 and furniture ₹ 50,000.
(ii) 1/3rd of above goods sold at a profit of 10% on cost and half of the payment is
received in cash remaining with cheque.
(iii) Depreciation on machinery provided @ 10%.
(iv) Cash withdrawn for personal use ₹ 10,000.
(v) Interest on drawings charged @ 5%.
(vi) Goods Sold to Giri for ₹ 10,000 and received a Bill Receivable for the same amount
for 3 months.
(vii) Received ₹ 10,000 from Giri against the Bills Receivable on its maturity.