Q1. Show the effect of following transactions on the Accounting equation:
(i) Tanya started business with cash `10,00,000.
(ii) Purchased goods for cash ` 40,000 & ` 60,000 on credit.
(iii) Withdrew for Private use ` 10,000.
(iv) Purchased machinery for cash ` 20,000.
(v) Paid salaries ` 5,000.
(vi) Received Interest ` 10,000.
(vii) Paid to creditors ` 20,000.
(viii) Sold goods for cash ` 25,000 (costing ` 15,000).
(ix) Sold goods on credit ` 15,000 (costing ` 10,000.
(x) Purchased furniture from Janak Furnitures ` 10.000.
(xi) Purchased goods on credit from Hari & Sons Ltd. `15,000.
(xii)Additional Capital introduced ` 2,00,000.
(xiii) Deposited ` 40,000 into bank.
(xiv) Commission received ins advance ` 5,000.
(xv)Sold goods (costing ` 10,000) for ` 15,000 out of which ` 5,000 received in cash.
(xvi) Depreciation on machinery @ 10%.
(xvii) Purchased a building from Sanya. Paid by raising loan from PNB ` 5,00,000.
(xviii) Paid interest on loan ` 10,000 & instalment of ` 1,00,000.
(xix) Took goods costing ` 10,000, selling price ` 12,000 for personal use.
(xx) Accrued Interest ` 10,000.

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Solution

S. No
Explanation
Assets
=
Liabilities
+
Capital

Cash
+
Stock
+
Machinery
+
Debtors
+
Furniture
+
Building
+
Accrued Interest
+
Bank
=
Loan
From
PNB
+
Creditors
+
Adv. Comm.

(i)
Increase in Cash
10,00,000

Increase in Capital

10,00,000

10,00,000

=

+
10,00,000
(ii)
Increase in Stock

1,00,000

Increase in Creditors

60,000

Decrease in Cash
(40,000)

9,60,000
+
1,00,000

=

+
60,000

+
10,00,000

(iii)
Decrease in Cash
(10,000)
+

Decrease in Capital
(Drawing)

(10,000)

9,50,000
+
1,00,000

=

+
60,000

9,90,000
(iv)
Increase in Machinery

20,000

Decrease in Cash
(20,000)

9,30,000
+
1,00,000
+
20,000

+
60,000

+
9,90,000
(v)
Decrease in Cash
(5,000)

Decrease in capital (Expense – Salary)

(5,000)

9,25,000
+
1,00,000
+
20,000

=

+
60,000

+
9,85,000
(vi)
Increase in Cash
10,000

Increase in Capital

10,000

(Profit- Interest)

9,35,000
+
1,00,000
+
20,000

=

+
60,000

+
9,95,000
(vii)
Decrease in Creditors

(20,000)

Decrease in Cash
(20,000)

9,15,000
+
1,00,000
+
20,000

+
40,000

+
9,95,000
(viii)
Increase in cash
25,000

Decrease in Stock

(15,000)

Profit

10,000

9,40,000
+
85,000
+
20,000

=

+
40,000

10,05,000
(ix)
Increase in Debtors

15,000

Decrease in Stock

(10,000)

Increase in Capital
(Profit)

5,000

9,40,000
+
75,000
+
20,000
+
15,000

=

+
40,000

+
10,10,000
(x)
Increase in Furniture

10,000

Increase in Creditors for furniture

10,000

9,40,000
+
75,000
+
20,000
+
15,000
+
10,000

=

+
50,000

+
10,10,000
(xi)
Increase in Stock

15,000

Increase in Creditors

15,000

9,40,000
+
90,000
+
20,000
+
15,000
+
10,000

65,000

+
10,10,000
(xii)
Increase in Cash
2,00,000

Increase in Capital

2,00,000

11,40,000
+
90,000
+
20,000
+
15,000
+
10,000

=

+
65,000

+
12,10,000
(xiii)
Increase in Bank

40,000

Decrease in Cash
(40,000)

11,00,000
+
90,000
+
20,000
+
15,000
+
10,000

+
40,000
=

+
65,000

+
12,10,000
(xiv)
Increase in Cash
5,000

Increase in Adv.
Comm.

5,000

11,05,000
+
990,000
+
20,000
+
15,000
+
10, 0000

+
40,000
=

+
65,000
+
5,000

+
12,10,000
(xv)
Decrease in Stock

(10,000)

Increase in Cash
5,000

Increase in Debtors

10,000

Increase in Capital
(Profit)

5,000

11,10,000
+
80,000
+
20,000
+
25,000
+
10,000

+
40,000
=

+
65,000
+
5,000

+
12,15,000
(xvi)
Decrease in Machinery

(2,000)

(20,000 × 10%

Decrease in Capital

(2,000)

(Depreciation - Loss)

11,10,000
+
80,000
+
18,000
+
25,000
+
10,000

+
40,000
=

+
65,000
+
5,000

+
12,13,000
(xvii)
Increase in Building

5,00,000

Increase in Loan

5,00,000

11,10,000
+
80,000
+
18,000
+
25,000
+
10,000
+
5,00,000

+
40,000
=
5,00,000
+
65,000
+
5,000

+
12,13,000
(xviii)
Decrease in Loan

(1,00,000)

Decrease in Capital
(Interest)

(10,000)

Decrease in Cash
(1,10,000)

10,00,000
+
80,000
+
18,000
+
25,000
+
10,000
+
5,00,000

+
40,000
=
4,00,000
+
65,000
+
5,000

+
12,03,000
(xix)
Decrease in Stock

(10,000)

Decrease in Capital (Drawings)

(10,000)

10,00,000
+
70,000
+
18,000
+
25,000
+
10,000
+
5,00,000

+
40,000
=
4,00,000
+
65,000
+
5,000

+
11,93,000
(xx)
Increase in Accrued Interest

10,000

Increase in Capital

10,000

10,00,000
+
70,000
+
18,000
+
25,000
+
10,000
+
5,00,000
+
10,000
+
40,000
=
4,00,000
+
65,000
+
5,000

+
12,03,000

Assets = Rs 16,73,000
Liabilities = Rs 4,70,000
Capital = Rs 12,03,000

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Similar questions

Q. Show the accounting equation on the basis of following transactions:
(i) Commenced business with Cash ₹ 20,000; Goods ₹ 50,000 and Furniture ₹ 30,000.
(ii) Purchased goods from Gopal on Credit ₹ 40,000.
(iii) Sold goods for Cash ₹ 40,000 (costing ₹ 30,000).
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Q. Show the accounting equation on the basis of the following transactions and present a Balance Sheet of the last new equation balance:

		(₹)
(i)	Mohan commenced business with	70,000
(ii)	Purchased goods on Credit	14,000
(iii)	Withdrew for private use	1,700
(iv)	Purchased goods for Cash	10,000
(v)	Paid wages	300
(vi)	Paid to Creditors	10,000
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Prepare accounting equation from the following
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(v) Accrud interest Rs. 2,000.
(vi) Rent received in advance Rs. 1,000.
(vii) Interest on capital @ 10% (only on cash introduced as capital).
(viii) Interest on drawings charged @ 5% (Total drawings till now is Rs. 10,000).
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(xi) Prepaid insurance Rs. 1,000.
(xii) Bad debts written off Rs. 1,000.

Q. Show the Accounting Equation on the basis of the following transactions and present a Balance Sheet on the last new equation balance:

		₹
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(iii)	Withdrew for Private use	1,700
(iv)	Goods purchased for cash	10,000
(v)	Paid wages	300
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Q. Prepare Accounting Equation from the following:
(a) Started business with cash ₹ 1,00,000.
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(c) Sold goods for cash costing ₹ 10,000 and on credit costing ₹ 15,000 both at a profit of 20% .
(d) Paid salaries ₹ 8,000.

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S. No	Explanation	Assets															=		Liabilities					+		Capital
S. No	Explanation	Cash	+	Stock	+	Machinery	+	Debtors	+	Furniture	+	Building	+	Accrued Interest	+	Bank	=	Loan From PNB		+	Creditors	+	Adv. Comm.
(i)	Increase in Cash	10,00,000
	Increase in Capital																										10,00,000
		10,00,000															=								+		10,00,000
(ii)	Increase in Stock			1,00,000
	Increase in Creditors																				60,000
	Decrease in Cash	(40,000)
		9,60,000	+	1,00,000													=			+	60,000				+		10,00,000

(iii)	Decrease in Cash	(10,000)	+
	Decrease in Capital (Drawing)																										(10,000)
		9,50,000	+	1,00,000													=			+	60,000						9,90,000
(iv)	Increase in Machinery					20,000
	Decrease in Cash	(20,000)
		9,30,000	+	1,00,000	+	20,000														+	60,000				+		9,90,000
(v)	Decrease in Cash	(5,000)
	Decrease in capital (Expense – Salary)																										(5,000)
		9,25,000	+	1,00,000	+	20,000											=			+	60,000				+		9,85,000
(vi)	Increase in Cash	10,000
	Increase in Capital																										10,000
	(Profit- Interest)
		9,35,000	+	1,00,000	+	20,000											=			+	60,000				+		9,95,000
(vii)	Decrease in Creditors																				(20,000)
	Decrease in Cash	(20,000)
		9,15,000	+	1,00,000	+	20,000														+	40,000				+		9,95,000
(viii)	Increase in cash	25,000
	Decrease in Stock			(15,000)
	Profit																										10,000
		9,40,000	+	85,000	+	20,000											=			+	40,000						10,05,000
(ix)	Increase in Debtors							15,000
	Decrease in Stock			(10,000)
	Increase in Capital (Profit)																										5,000
		9,40,000	+	75,000	+	20,000	+	15,000									=			+	40,000				+		10,10,000
(x)	Increase in Furniture									10,000
	Increase in Creditors for furniture																				10,000
		9,40,000	+	75,000	+	20,000	+	15,000	+	10,000							=			+	50,000				+		10,10,000
(xi)	Increase in Stock			15,000
	Increase in Creditors																				15,000
		9,40,000	+	90,000	+	20,000	+	15,000	+	10,000											65,000				+		10,10,000
(xii)	Increase in Cash	2,00,000
	Increase in Capital																										2,00,000
		11,40,000	+	90,000	+	20,000	+	15,000	+	10,000							=			+	65,000				+		12,10,000
(xiii)	Increase in Bank															40,000
	Decrease in Cash	(40,000)
		11,00,000	+	90,000	+	20,000	+	15,000	+	10,000					+	40,000	=			+	65,000				+		12,10,000
(xiv)	Increase in Cash	5,000
	Increase in Adv. Comm.																						5,000
		11,05,000	+	990,000	+	20,000	+	15,000	+	10, 0000					+	40,000	=			+	65,000	+	5,000		+		12,10,000
(xv)	Decrease in Stock			(10,000)
	Increase in Cash	5,000
	Increase in Debtors							10,000
	Increase in Capital (Profit)																										5,000
		11,10,000	+	80,000	+	20,000	+	25,000	+	10,000					+	40,000	=			+	65,000	+	5,000		+		12,15,000
(xvi)	Decrease in Machinery					(2,000)
	(20,000 × 10%
	Decrease in Capital																										(2,000)
	(Depreciation - Loss)
		11,10,000	+	80,000	+	18,000	+	25,000	+	10,000					+	40,000	=			+	65,000	+	5,000		+		12,13,000
(xvii)	Increase in Building											5,00,000
	Increase in Loan																	5,00,000
		11,10,000	+	80,000	+	18,000	+	25,000	+	10,000	+	5,00,000			+	40,000	=	5,00,000		+	65,000	+	5,000		+		12,13,000
(xviii)	Decrease in Loan																	(1,00,000)
	Decrease in Capital (Interest)																										(10,000)
	Decrease in Cash	(1,10,000)
		10,00,000	+	80,000	+	18,000	+	25,000	+	10,000	+	5,00,000			+	40,000	=	4,00,000		+	65,000	+	5,000		+		12,03,000
(xix)	Decrease in Stock			(10,000)
	Decrease in Capital (Drawings)																										(10,000)
		10,00,000	+	70,000	+	18,000	+	25,000	+	10,000	+	5,00,000			+	40,000	=	4,00,000		+	65,000	+	5,000		+		11,93,000
(xx)	Increase in Accrued Interest													10,000
	Increase in Capital																										10,000
		10,00,000	+	70,000	+	18,000	+	25,000	+	10,000	+	5,00,000	+	10,000	+	40,000	=	4,00,000		+	65,000	+	5,000		+		12,03,000