Question

Prepare an Accounting Equation on the basis of the following transactions:
(i) Started business with cash ₹ 70,000.
(ii) Credit purchase of goods ₹ 18,000.
(iii) Payment made to creditors in full settlement ₹ 17,500.
(iv) Purchase of machinery for cash ₹ 20,000.
(v) Depreciation on machinery ₹ 2,000.

Answer 1

S. No.	Transaction	Assets					=	Liabilities	+	Capital
		Cash (Rs)	+	Stock (Rs)	+	Machinery (Rs)		(Rs)		(Rs)
(i)	Started business with Cash Rs 70,000	70,000								70,000
		70,000								70,000
(ii)	Credit purchase of goods Rs 18,000			18,000			=	18,000
		70,000	+	18,000			=	18,000	+	70,000
(iii)	Payment made to creditor Rs 17,500 in full settlement	– 17,500					=	– 18,000	+	500 (Discount Received)
		52,500	+	18,000			=			70,500
(iv)	Purchase of Machinery for Cash Rs 20,000	– 20,000				20,000
		32,500	+	18,000	+	20,000	=			70,500
(v)	Depreciation on Machinery Rs 2,000					– 2,000				– 2,000 (Depreciation)
		32,500	+	18,000	+	18,000	=			68,500

Assets	=		32,500 + 18,000 + 18,000
	=	Rs	68,500
Liabilities	=		NIL
Capital	=	Rs	68,500