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Question

Prepare Accounting Equation on the basis of the following transactions:
(a) Started business with cash ₹ 70,000.
(b) Credit purchase of goods ₹ 18,000.
(c) Payment made to creditors in full settlement ₹ 17,500.
(d) Purchase of machinery for cash ₹ 20,000.


Solution

ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
Cash + Stock + Machinery  = Creditors    
(i) Started business with cash +70,000               +70,000
    70,000         =     70,000
(ii) Purchased goods on credit     +18,000       +18,000    
    70,000 + 18,000     = 18,000 + 70,000
(iii) Payment to creditors in full settlement –17,500           –18,000   +500 (Gain)
    52,500 + 18,000     = 0 + 70,500
(iv) Purchased machinery for cash –20,000     + 20,000        
    32,500 + 18,000 + 20,000 = 0 + 70,500
                     

Accountancy
DK Goel (2019)
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