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Question

# Show the accounting equation on the basis of the following transactions and present a Balance Sheet of the last new equation balance: (₹) (i) Mohan commenced business with 70,000 (ii) Purchased goods on Credit 14,000 (iii) Withdrew for private use 1,700 (iv) Purchased goods for Cash 10,000 (v) Paid wages 300 (vi) Paid to Creditors 10,000 (vii) Sold goods on Credit at par 15,000 (viii) Sold goods for Cash (cost price was ₹ 3,000) 4,000 (ix) Purchased furniture for cash 500

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Solution

## ACCOUNTING EQUATION S. No. Transaction Assets = Liabilities + Capital Cash + Stock + Debtors + Furniture = Creditors (i) Started business with cash +70,000 + 70,000 70,000 = 70,000 (ii) Purchased goods on credit +14,000 +14,000 70,000 + 14,000 = 14,000 + 70,000 (iii) Withdrew for private use –1,700 –1,700 (Drawings) 68,300 + 14,000 = 14,000 + 68,300 (iv) Purchased goods for cash –10,000 +10,000 58,300 + 24,000 = 14,000 + 68,300 (v) Wages paid –300 –300 (Expense) 58,000 + 24,000 = 14,000 + 68,000 (vi) Paid to creditors –10,000 –10,000 48,000 + 24,000 = 4,000 + 68,000 (vii) Sold goods on credit at par –15,000 +15,000 48,000 + 9,000 + 15,000 = 4,000 + 68,000 (viii) Sold goods (costing Rs 3,000) for Rs 4,000 +4,000 –3,000 +1,000 (Profit) 52,000 + 6,000 + 15,000 = 4,000 + 69,000 (ix) Furniture purchased –500 +500 51,500 + 6,000 + 15,000 + 500 = 4,000 + 69,000 Balance Sheet as on …… Liabilities Amount (Rs) Assets Amount (Rs) Creditors 4,000 Cash 51,500 Capital 69,000 Stock 6,000 Debtors 15,000 Furniture 500 73,000 73,000

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