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Question

Show the Accounting Equation on the basis of the following and present a balance sheet on the last new equation balances:

(₹)

(i)

Manu started business with cash

50,000

(ii) Bought furniture for 500
(iii) Purchased goods on credit 4,000
(iv) Sold goods on cash (cost ₹ 500) for 700
(v) Received rent 200
(vi) Purchased goods for cash 1,000
(vii) Withdrew for personal use 700
(viii) Paid to creditors 400
(ix)

Paid for salaries

200

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Solution

ACCOUNTING EQUATION
S. No. Transaction Assets = Liabilities + Capital
Cash + Furniture + Stock = Creditors
(i) Manu started business with cash +50,000 +50,000
50,000 = + 50,000
(ii) Purchased Furniture –500 +500
49,500 + 500 + 50,000
(iii) Purchased goods on credit +4,000 +4,000
49,500 + 500 + 4,000 = 4,000 + 50,000
(iv) Sold goods costing Rs 500 for Rs 700 +700 –500 +200 (Profit)
50,200 + 500 + 3,500 = 4,000 + 50,200
(v) Rent received +200 +200 (Income)
50,400 + 500 + 3,500 = 4,000 + 50,400
(vi) Purchased goods for cash –1,000 +1,000
49,400 + 500 + 4,500 = 4,000 + 50,400
(vii) Withdrew for personal use –700 –700 (Drawings)
48,700 + 500 + 4,500 = 4,000 + 49,700
(viii) Paid to creditors –400 –400
48,300 + 500 + 4,500 = 3,600 + 49,700
(ix) Salaries paid –200 -200
48,100 + 500 + 4,500 = 3,600 + 49,500

Balance Sheet
as on ……
Liabilities Amount (Rs) Assets Amount (Rs)
Creditors 3,600 Cash 48,100
Capital 49,500 Furniture 500
Stock 4,500
53,100 53,100

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