Question

Draw an Accounting Equation on the basis of the following transactions:
​(i) Commenced business with cash ₹ 50,000, cheque ₹ 1,00,000, goods ₹ 30,000 and furniture ₹ 20,000.
(ii) Car, personal asset of the proprietor, was sold for ₹ 1,00,000 against cheque which he deposited in his Savings Account.
(iii) An amount of ₹ 50,000 was transferred from his Savings Account to the firm's Bank Account.
(iv) A new car was purchased for ₹ 6,00,000 for office use. It was paid by taking loan from Bank of ₹ 5,00,000 and balance by issue of cheque from firm's Bank Account .
(v) Sold goods to Ajay on credit costing ₹ 4,000 for ₹ 5,000.
(vi) Sold goods for cash costing ₹ 12,000 for ₹ 16,000
(vii) Purchased good for cash ₹ 40,000
(viii) Purchased goods on credit for ₹ 20,000.
(ix) Paid rent ₹ 3,000 including ₹ 2,000 in advance .
(x) Paid salaries ₹ 2,000.
(xi) Sold goods costing ₹ 8,000 for ₹ 10,000.
(xii) Salaries outstanding ₹ 1,000.
(xiii) Charge depreciation on furniture ₹500.

Answer 1

S. No.	Reasons	Assets													=	Liabilities					+	Capital
		Cash (Rs)	+	Cheque (Rs)	+	Car (Rs)	+	Stock (Rs)	+	Furniture (Rs)	+	Debtors (Rs)	+	Prepaid Rent (Rs)	=	Creditors (Rs)	+	Bank Loan (Rs)	+	Salary Outstanding (Rs)		(Rs)
(i)	Cash	50,000
	Cheque			1,00,000
	Stock							30,000
	Furniture									20,000
	Capital																					2,00,000
		50,000	+	1,00,000	+			30,000	+	20,000					=							2,00,000
(iii)	Rs 50,000 transferred from Savings A/c to firm's Bank A/c			50,000																		50,000
		50,000	+	1,50,000	+			30,000	+	20,000					=							2,50,000
(iv)	New car purchased for Rs 6,00,000 by taking bank loan of Rs 5,00,000 and by paying from Bank A/c			– 1,00,000	+	6,00,000												5,00,000
		50,000	+	50,000	+	6,00,000	+	30,000	+	20,000					=			5,00,000			+	2,50,000
(v)	Decrease in Stock							– 4,000
	Debtors (Ajay)											5,000
	Increase in Capital (Profit)																					1,000
		50,000	+	50,000	+	6,00,000	+	26,000	+	20,000	+	5,000			=			5,00,000			+	2,51,000
(vi)	Increase in Cash	16,000
	Decrease in Stock							– 12,000	+
	Increase in Capital (Profit)																					4,000
		66,000	+	50,000	+	6,00,000		14,000	+	20,000	+	5,000			=			5,00,000			+	2,55,000
(vii)	Increase in Stock							40,000
	Decrease in Cash	–40,000
		26,000	+	50,000	+	6,00,000	+	54,000	+	20,000	+	5,000			=						+	2,55,000
(viii)	Increase in Stock						+	20,000
	Decrease in Creditors															20,000
		26,000	+	50,000	+	6,00,000	+	74,000	+	20,000	+	5,000			=	20,000	+	5,00,000			+	2,55,000
(ix)	Decrease in Cash	– 3,000
	Prepaid Rent													2,000
	Decrease in Capital																					– 1,000
		23,000	+	50,000	+	6,00,000	+	74,000	+	20,000	+	5,000	+	2,000	=	20,000	+	5,00,000			+	2,54,000
(x)	Decrease in Cash	–2,000
	Decrease in Capital																					– 2,000
		21,000	+	50,000	+	6,00,000	+	74,000	+	20,000	+	5,000	+	2,000	=	20,000	+	5,00,000			+	2,52,000
(xi)	Decrease in Stock							– 8,000
	Increase in Cash	10,000
	Increase in Capital																					2,000
		31,000	+	50,000	+	6,00,000	+	66,000	+	20,000	+	5,000	+	2,000	=	20,000	+	5,00,000			+	2,54,000
(xii)	Decrease in Capital																					– 1,000
	Salaries Outstanding																			1,000
		31,000	+	50,000	+	6,00,000	+	66,000	+	20,000	+	5,000	+	2,000	=	20,000	+	5,00,000	+	1,000	+	2,53,000
(xiii)	Decrease in Capital																					– 500
	Decrease in Furniture									– 500
		31,000	+	50,000	+	6,00,000	+	66,000	+	19,500	+	5,000	+	2,000	=	20,000	+	5,00,000	+	1,000	+	2,52,500

Note: Point (ii) doesn't have any impact on the Accounting Equation, therefore it is not shown in the above statement.

Assets	=	31,000 + 50,000 + 6,00,000 + 66,000 + 19,500 + 5,000 + 2,000 = 7,73,500
Liabilities	=	20,000 + 5,00,000 + 1,000 = 5,21,000
Capital	=	2,52,500