Question

Q. 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.

Answer 1

S. No.	Transaction	Assets									=	Liabilities			+	Capital
		Cash	+	Bank	+	Stock	+	Debtors	+	Prepaid expenses	=	Creditors	+	Outstanding Rent
(i)	Started business with cash Rs1,80,000	+1,80,000														+1,80,000
	New Equation	1,80,000														1,80,000
(ii)	Purchased goods for cash Rs60,000 and Credit Rs30,000	-60,000				+90,000						+30,000
	New Equation	1,20,000				90,000						30,000				1,80,000
(iii)	Sold goods for cash Rs40,000 (cost Rs24,000)	+40,000				-24,000										+16,000
	New Equation	1,60,000				66,000						30,000				1,96,000
(iv)	Rent Paid Rs5,000 and Rent outstanding Rs2,000	-5,000												+2,000		-5,000 -2000
	New Equation	1,55,000				66,000						30,000		2,000		1,89,000
(v)	Sold goods on credit Rs50,000 (cost Rs38,000)					-38,000		+50,000								+12,000
	New equation	1,55,000				28,000		50,000				30,000		2,000		2,01,000
(vi)	Salaries paid in advance Rs3,000	-3,000								+3,000
		1,52,000				28,000		50,000		3,000		30,000		2,000		2,01,000
	New Equation	1,52,000		0		28,000		50,000		3,000		30,000		2,000		2,01,000