Logical Description of Accounting Equation(AE)

Q.

Show the effect of the following transactions on Assets, Liabilities and Capital through accounting equation

$\begin{array}{cc}\text{Transaction}& \text{Amount (Rs.)}\\ \text{a. Started business with cash}& \text{1, 20, 000}\\ \text{b. Rent received}& \text{10, 000}\\ \text{c. Invested in shares}& \text{50, 000}\\ \text{d. Received dividend}& \text{5, 000}\\ \text{e. Purchased goods on credit from Ragini}& \text{35, 000}\\ \text{f. Paid cash for household expenses}& \text{7, 000}\\ \text{g. Sold goods for cash (costing Rs. 10, 000)}& \text{14, 000}\\ \text{h. Cash paid to Ragini}& \text{35, 000}\\ \text{i. Deposited into bank}& \text{20, 000}\end{array}$

Q.

Following information is given in trail balance

$\begin{array}{cc}\text{Bad debt}& Rs.3,000\\ \text{Provision for bad debts}& Rs.3,500\\ \text{Debtors}& Rs.40,000\end{array}$

Additional Information:

It is desired to make a provision for doubtful debts @10% on debtors. Find the amount to be debited to profit and loss account.

Q.

Prepare accounting equation from the following

$\begin{array}{cc}|& \\ & \left(Rs\right)\\ \text{(a) Kunal started business with cash}& 2,50,000\\ \text{(b)He purchased furniture for cash}& 35,000\\ \text{(c) He paid commission}& 2,000\\ \text{(d) He purchase goods on credit}& 40,000\\ \text{(e) He sold goods(costing Rs 20, 000) for cash}& 26,000\end{array}$

Q.

Rohit has the following transactions

$\begin{array}{cc}& \\ & \left(Rs\right)\\ \text{(a)Commenced business with cash}& 1,50,000\\ \text{(b) Purchased machinery on credit}& 40,000\\ \text{(c) Purchased goods for cash}& 20,000\\ \text{(d) Purchased car for personal use}& 80,000\\ \text{(e) Paid to Creditors in full settlement}& 38,000\\ \text{(f) Sold goods for cash costing Rs 5, 000}& 4,500\\ \text{(g) Paid rent}& 1,000\\ \text{(h) Commission received}& 2,000\end{array}$

Prepare the accounting equation to show the effect of the above transactions on the assets, liabilities and capital.

Q.

Accounting equation (A = L + C) always holds good under all circumstances. Explain.
OR
Accounting equation remains intact under all circumstances. Justify the statement with the help of an example.

Q.

From the following details, find the amount of Capital:

Particulars	Amount
Cash balance	10, 000
Furniture	20, 000
Stock	25, 000
Creditors	10, 000
Debtors	25, 000
Loan from bank	10, 000

1. 30000

2. 50000

3. 40000

4. 60000

Q.

The total amounts of two sides of accounting equation are always ___ because they represent two different views of the same thing.

1. Less than the other side

2. Greater than the other side

3. Equal

4. None of the above

Q.

Rahul's trial balance provide you the following information:

$\begin{array}{cc}\text{Debtors}& Rs.80,000\\ \text{Bad debts}& Rs.2,000\\ \text{Provision for bad debts}& Rs.4,000\end{array}$

It is desired to maintain a provision for bad debts of Rs. 1, 000. State the amount to be debited/credited in profit and loss account.

Q. If the capital of a business is Rs.1, 05, 000 and liabilities are Rs.25, 000, then the value of assets will be .

1. Rs.80, 000
2. Rs.1, 05, 000
3. Rs.25, 000
4. Rs.1, 30, 000

Q. According to accounting equation, the value of assets in a business is always equal to the sum of the value of ___.

1. Capital only
2. Assets, Liabilities & Capital
3. Liabilities only
4. Liabilities & Capital

Q.

Find out the missing value liabilities in an accounting equation with the help of the following given data?
$\begin{array}{cc}\text{Furniture}& 90,000\\ \text{Cash}& 1,00,000\\ \text{Debtors}& 10,000\\ \text{Other Assets}& 1,000\\ \text{Capital}& 90,000\end{array}$

1. Rs 2, 91, 000

2. Rs 2, 01, 000

3. Rs 2, 90, 000

4. Rs 1, 11, 000

Q.

Mr. John started a T-shirts business to be known as “John T-shirts”. Mr. John invested Rs 15, 000 into his business. Which of the following shall be effected by this transaction in the accounting equation?

1. Assets & Liabilites

2. Assets & Capital

3. Assets, Liabilities & Capital

4. Liabilities & Capital

Q.

If the total liabilities of a business decrease by Rs 5000 what will be the effect on total assets? (assuming the amount of capital remain same).

1. Increase by Rs 10, 000

2. Decrease by Rs 10, 000

3. Decrease by Rs 5, 000

4. None of the above

Q. Accounting equation is simply an expression of the relationship among ___ in a business.

1. Assets & Capital
2. Liabilities & Capital
3. Assets, Liabilities & Capital
4. Assets & Liabilities

Q.

Sunny ltd. purchased a vehicle for Rs. 4, 00, 000 After 4 years its salvage value is estimated at Rs. 40, 000. Find out the amount of depreciation to be charged every year based on a straight line basis and show how to vehicle account would appear for 4 years assuming, it is sold for Rs. 50, 000 at the end, when provision for depreciation account is maintained.

Q.

Better-Cars Selection, a used car dealer, has total assets and liabilities of Rs 50, 000 and Rs18, 000, respectively. The firm constructed a shelter for its automobiles by promising to pay the building contractor, upon completion of the building, Rs 500 per month for twenty-four months. Upon completion, owner's capital account will:

1. Increase by Rs 12, 000

2. Remain unchanged

3. Decrease by Rs 12, 000

4. Increase by Rs 500, each month

Q.

Using the concept of accounting equation, compute missing figure from the following:
Assets = Rs 50, 000, Liabilities = Rs 20, 000, Owner’s Capital = ?

1. Rs 30, 000

2. Rs 20, 000

3. Rs 70, 000

4. Rs 50, 000

Q. Select the most appropriate alternatives from those given below and rewrite the statements :

Expenditure incurred or purchase of fixed Asset is ______.
a) Revenue Expenditure
b) Capital Expenditure
c) Deferred revenue expenditure
d) None of these

Q.

Vinod has the following transactions.Show accounting equation for the same:

(i) Commenced business with Cash Rs.50, 000; and Stock Rs.30, 000 and Machinery Rs.20, 000.

(ii) Goods purchases on credit Rs.10, 000.

(iii) Rent Received Rs.5, 000.

(iv) Sold goods costing Rs.9, 000 for Cash Rs.12, 000.

Q.

Increase in expenses will ________ the capital.

1. Increase

2. Decrease

3. No change

4. None of these

Q. What is the reason for an net omissions and errors account?

1. None of the above
2. It is a balancing item
3. Increases errors
4. Reduces errors

Q. Answer in one sentence.

What do you mean by prepaid expenses?

Q.

Prepared Trial balance from the following information

Q. Give the word term or phrase which can substitute each of the following statements :

Expenditure on fixed assets which increases the earning capacity of the business.

Q.

Question

Q.

The left hand side which is also known as assets side of the equation shows which of the following?

1. The resources owned by the business

2. Liabilities of the business

3. Capital introduced in the business

4. The sources of fund used to acquire the resources

Q.

Which of the following is correct?

1. Value of resources owned = Residual claim + Lender's claim

2. All the above

3. Assets = Liabilities + Capital

4. Value of resources owned = Owner's funds + Borrowed funds

Q. Why is it necessary for accountants to assume that business entity will remain a going concern?

Q. Question