If amount of 950 is received from a debtor of Rs.1,000 in final settlement then what will be the effect of this transaction on the capital?

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Solution

Dear Student, in this case, Capital should be reduced by Rs 50, for discount allowed to a debtor.

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

Show the effect of following transaction on the accounting equation:

		Rs
(a)	Manoj started business with
	(i) Cash	2,30,000
	(ii) Goods	1,00,000
	(iii) Building	2,00,000
(b)	He purchased goods for cash	50,000
(c)	He sold goods(costing Rs 20,000)	35,000
(d)	He purchased goods from Rahul	55,000
(e)	He sold goods to Varun (Costing Rs 52,000)	60,000
(f)	He paid cash to Rahul in full settlement	53,000
(g)	Salary paid by him	20,000
(h)	Received cash from Varun in full settlement	59,000
(i)	Rent outstanding	3,000
(j)	Prepaid Insurance	2,000
(k)	Commission received by him	13,000
(l)	Amount withdrawn by him for personal use	20,000
(m)	Depreciation charge on building	10,000
(n)	Fresh capital invested	50,000
(o)	Purchased goods from Rakhi	6,000

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