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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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