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.

Answer 1

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