Question

Show the effect of the following transactions on the Accounting Equation:
(i) Started business with cash ₹ 50,000.
(ii) Salaries paid ₹ 2,000.
(iii) Wages Outstanding ₹ 200.
(iv) Interest due but not paid ₹ 100.
(v) Rent paid in advance ₹ 150.

Answer 1

S. No.	Transactions	Assets			=	Liabilities	+	Capital
		Cash (Rs)	+	Advances Expenses (Rs)	=	Outstanding Expenses (Rs)		(Rs)
(i)	Started business with Cash	50,000			=			50,000
		50,000			=			50,000
(ii)	Salaries paid	– 2,000			=			– 2,000 (expenses)
		48,000			=			48,000
(iii)	Wages Outstanding				=	200	+	– 200 (expenses)
		48,000			=	200		47,800
(iv)	Interest due but not paid				=	100	+	– 100 (expenses)
		48,000			=	300	+	47,700
(v)	Rent paid in advance	– 150	+	150	=
		47,850	+	150	=	300	+	47,700

Assets	=		47,850 + 150
	=	Rs	48,000
Liabilities	=	Rs	300
Capital	=	Rs	47,700