2
Question
Prove that accounting equation is satisfied in all the following cases:
(a) Commenced business with cash ₹ 50,000.
(b) Paid rent ₹ 4,000 including ₹ 1,000 as advance.
(c) Bought goods for cash ₹ 30,000 and on credit ₹ 20,000.
(d) Sold the goods bought on credit for ₹ 25,000.
(e) Purchased furniture worth ₹ 10,000 for office use and for ₹ 5,000 for domestic use.
(a) Commenced business with cash ₹ 50,000.
(b) Paid rent ₹ 4,000 including ₹ 1,000 as advance.
(c) Bought goods for cash ₹ 30,000 and on credit ₹ 20,000.
(d) Sold the goods bought on credit for ₹ 25,000.
(e) Purchased furniture worth ₹ 10,000 for office use and for ₹ 5,000 for domestic use.
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Solution
ACCOUNTING EQUATION
S. No.
Transaction
Assets
=
Liabilities
+
Capital
Cash
+
Prepaid
Rent
+
Stock
Furniture
=
Creditors
(i)
Started business with cash
+50,000
+50,000
50,000
=
+
50,000
(ii)
Paid rent Rs 4,000 including Rs 1,000 as advance
–4,000
+1,000
–3,000 (Expense)
46,000
+
1,000
=
+
47,000
(iii)
Purchased goods for cash Rs 30,000 and on credit Rs 20,000
–30,000
+50,000
+20,000
16,000
+
1,000
+
50,000
=
20,000
+
47,000
(iv)
Sold goods (costing Rs 20,000) for Rs 25,000
+25,000
–20,000
+5,000 (Profit)
41,000
+
1,000
+
30,000
=
20,000
+
52,000
(v)
Purchased furniture Rs 10,000 for office use and Rs 5,000 for domestic use
–15,000
+10,000
–5,000 (Drawings)
26,000
+
1,000
+
30,000
+
10,000
=
20,000
+
47,000
| ACCOUNTING EQUATION | ||||||||||||
| S. No. | Transaction | Assets | = | Liabilities | + | Capital | ||||||
| Cash | + | Prepaid Rent |
+ | Stock | Furniture | = | Creditors | |||||
| (i) | Started business with cash | +50,000 | +50,000 | |||||||||
| 50,000 | = | + | 50,000 | |||||||||
| (ii) | Paid rent Rs 4,000 including Rs 1,000 as advance | –4,000 | +1,000 | –3,000 (Expense) | ||||||||
| 46,000 | + | 1,000 | = | + | 47,000 | |||||||
| (iii) | Purchased goods for cash Rs 30,000 and on credit Rs 20,000 | –30,000 | +50,000 | +20,000 | ||||||||
| 16,000 | + | 1,000 | + | 50,000 | = | 20,000 | + | 47,000 | ||||
| (iv) | Sold goods (costing Rs 20,000) for Rs 25,000 | +25,000 | –20,000 | +5,000 (Profit) | ||||||||
| 41,000 | + | 1,000 | + | 30,000 | = | 20,000 | + | 52,000 | ||||
| (v) | Purchased furniture Rs 10,000 for office use and Rs 5,000 for domestic use | –15,000 | +10,000 | –5,000 (Drawings) | ||||||||
| 26,000 | + | 1,000 | + | 30,000 | + | 10,000 | = | 20,000 | + | 47,000 | ||
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